When The Market Shrugs — And Whether We Should Too

Photo by Ben Kim on Unsplash

This post is part of my ongoing series on investment philosophy. If you haven't read the earlier pieces, you can find them at https://www.williamseah.com/blog.

It has been roughly two months since the Iran war began.

The Strait of Hormuz — one of the most critical chokepoints in the global energy supply chain — remains restricted. Oil and fertiliser shipments have been disrupted. Energy facilities have been hit and will take time to rebuild. The war shows no signs of ending, and continues to impose real costs on the world. What makes it worrying is some of it has not been fully filtered down.

And yet, if you looked at the markets, you might not know any of this had happened. Markets have, for the most part, shrugged.

The Market Is Not Always Right

Global stock markets do not fully reflect the risks in the global economy

Vikram Khanna, writing in the Straits Times,¹ made a pointed observation: the market is not always right. He cited Bank of England deputy governor Sarah Breeden's warning that global stock markets do not fully reflect the risks in the global economy² — and that a correction may be coming.

It is a sobering thought, and not without merit.

Oil is not just a commodity. It is a critical system of the global economy; energy and transport rely on oil significantly. When its supply is disrupted, the effects ripple outward — into energy prices, into inflation, into the cost of everything from manufacturing to transport to food. A prolonged war in one of the world's most critical energy regions is not a footnote. It is a material risk.

And that is before we consider the possibility of the conflict spreading. Or the reality that the United States is currently led by a president whose next move is difficult to predict.

So yes. The market may well be mispriced. Khanna and Breeden may be right.

But Here Is The Problem

Knowing the market is mispriced and knowing what to do about it are two very different things.

The market is not a simple either-or choice. It is not a decision between large cap or small cap, between defensive stocks and offensive ones, between going long or selling short. The market is a vast conglomerate of options — and combinations of those options — spanning thousands of companies, dozens of sectors, and nearly every country in the world.

To find that one peculiar set-up that wins, out of the countless combinations that don't, is not investing. It is gambling. And even the most sophisticated investors — armed with the best data, the sharpest analysts, and decades of experience — get it wrong more often than they would like to admit.

The Bank of England's deputy governor can tell us that markets are mispriced. But she cannot tell us exactly when they will correct, by how much, or which assets will be affected most. Neither can I. Neither can anyone.

What We Can Do

It’s 10% having a good idea and 90% implementing that idea and making it work. - Robert Merton, Nobel Laureate, 1997.

This is precisely where the case for diversification becomes not just sensible, but essential.

A diversified portfolio — one that holds thousands of companies across nearly every country and every market size — does something quietly powerful. It ensures that whatever happens, you have already bought the winners. Yes, you have also bought the losers. But the winners, over time, more than compensate for the losers. That is what the data tells us, consistently, across decades.

A concentrated portfolio — one that bets heavily on a specific sector, a specific country, or a specific thesis — asks a much harder question. Did I buy the winner? Or did I buy the loser? In an environment as uncertain as this one, that is a question I would not want to lose sleep over.

A diversified portfolio lets you sleep at night. Not because it eliminates risk — nothing does. But because it spreads risk so widely that no single event, no single mispricing, no single bad call can derail the whole plan.

The market may not always be right. But trying to outsmart it, in the middle of a war, with an unpredictable geopolitical landscape and a central banker warning of a correction — that is a harder game than most of us should be playing.

Stay diversified. Stay patient. Stay the course.

I write on topics related to financial habits and decisions. Do explore my other articles at https://www.williamseah.com/blog if the ideas resonate. Drop me an email at reach.william@gmail.com or text me at 9673 1523 if you'd like to chat over coffee or whisky.

References

¹ Khanna, V. (2026, April 28). Are stock markets in denial about the true cost of the Iran War? Straits Times, Opinion. A timely piece that I happened upon as I was already preparing a similar post regarding markets — it felt like a sign to publish.

² Breeden, S., as reported by CNBC, April 24 2026. Bank of England deputy governor for financial stability Sarah Breeden highlighted that significant risks remain unpriced in global equity markets, and warned of the likelihood of multiple risks crystallizing simultaneously. Read the full report