This article was first published in Investment Week.

In theory, financial markets aggregate probability-weighted expectations about future outcomes. In practice, prices are also influenced by investor psychology and market dynamics. Uncertainty is therefore intrinsic to investing, and managing it is central to achieving good outcomes.

The temptation to wait

I frequently meet clients who worry about committing capital. The world is an uncertain place, and it always feels safer to wait for more certain times. It is one of the most understandable instincts in finance. It is also one of the most consistently costly.

Right now, the case for waiting feels unusually compelling.

To focus on just one issue: the US-Iran ceasefire appears fragile and, more importantly, does not yet look like a sustainable equilibrium. Continued disruption in the Strait of Hormuz is not simply a geopolitical headline; it maintains pressure on commodity supplies and complicates the outlook for central banks and markets. How should investors — and central banks — weigh the growth risks from higher energy prices against the inflation risks? Markets have moved to discount tighter policy from the Bank of England and the ECB, but have been slower to price a similar response from the Federal Reserve, despite stronger US growth and tighter labour markets. The Fed is in transition – with a new chair incoming its reaction function is harder to predict.

None of this lends itself to easy answers. The siren calls for procrastination are loud.

We frequently talk of markets “climbing a wall of worry”. It is an apt expression. This year I have often reassured clients that the most dangerous markets are not the ones full of worry, but the ones where worry has vanished. That is when investors become over-confident, exuberance stalks markets, and seasoned investors should become more wary.

So what is an investor to do today?