Why Markets Fear Uncertainty More Than Bad News
It’s not the bad news that markets fear. It’s the not knowing.
Turn on the news these days and you will hear alarming words: war, tariffs, uncertainty, inflation. It’s natural to worry about the world and to wonder about your financial plan.
If you find the current environment unsettling, you’re not alone. In a recent post, Ben Carlson — a professional money manager and widely read financial writer — admits he feels the same. Rapid technological change, combined with heightened geopolitics, makes ambiguity feel like it’s through the roof.
Markets can handle bad news. What they struggle with is not knowing what comes next.
Think of it like travel plans: if an airline cancels your flight, you can rebook. But if they say the flight might leave, might be cancelled, or might be rerouted — and they’ll only know later — you’re stuck waiting. That suspended feeling is like what investors are dealing with today.
Right now, several big questions are overlapping at once: geopolitical conflict with no clear timeline; trade policy that’s shifting quickly; and an economy that has become more sensitive to changes in technology, inflation and interest rates.
Carlson offers a useful anchor: The biggest risk is rarely the one everyone is planning for or talking about. When a risk is widely discussed, markets often adjust to it faster than we do.
We’re watching a convergence of uncertainties — and historically, as each one becomes clearer, markets often stabilize sooner than most investors expect.
How today’s headlines can ripple into inflation, rates, and portfolios
The Middle East conflict triggered a sharp rise in oil prices, with crude jumping from under $60 to over $100 a barrel since early 2026. Then there’s Iran’s threat to close the Strait of Hormuz, unquestionably enough to rattle energy markets, according to BMO Economics. Oil is embedded in the cost of shipping, manufacturing, and heating your home. So, when the price of oil rises, prices across the economy follow — and that is inflation.
For all of us, this can show up in everyday ways: higher prices at the pump, more expensive groceries and shipping costs, and — over time — higher borrowing costs on variable-rate debt. When household budgets feel tighter, markets can become more reactive. Further, BMO’s economists estimate the conflict could push headline inflation up as oil is running higher across all of 2026 than previously expected.
This matters because markets had been expecting the Bank of Canada and the U.S. Federal Reserve to cut interest rates this year. But if inflation re-accelerates, those cuts can get delayed — or may not happen at all. BMO notes that if a supply shock pushes costs higher without slowing growth, central banks may lean toward keeping rates higher for longer.
When rates stay elevated, investors often pay less for stocks — especially companies whose value depends heavily on profits expected far in the future.
For Canadian investors, there’s a notable advantage in the current environment. As a net energy exporter, Canada can benefit when oil prices rise, which may provide a partial offset to some of the inflationary pressure higher energy prices create. BMO Economics notes that Canada’s resource base can act as a stabilizer for the broader economy and market in certain commodity-driven periods.
In contrast, the U.S. economic backdrop presents a different kind of vulnerability. According to BMO Chief U.S. Economist Scott Anderson, the top 20% of American earners account for 60% of total income, 71% of net worth, and 57% of consumer spending—figures that reflect an increasing concentration since the 1990s. This “K-shaped” economy is relatively resilient to job losses, since those who drive most spending are less likely to be laid off. However, it is highly sensitive to stock market declines, as falling asset values can quickly dampen the spending of this key group. While Canada’s economy is less concentrated—with broader social supports and a more substantial middle class—developments in the U.S. inevitably impact Canada.
Tariffs, AI, and the uncertainty premium
Meanwhile, trade policy has been adding its own layer of noise. In February, the U.S. Supreme Court struck down a broad set of emergency tariffs, briefly dropping the average effective tariff rate, before the Trump administration invoked a different legal authority to push it back up. More industry-specific duties covering semiconductors, aircraft, and critical minerals are still in the pipeline, says BMO.
Goods compliant under the United States-Mexico-Canada Agreement (USMCA) retain duty-free access, which is meaningful protection for Canadian exporters. However, the unpredictability of USMCA is corrosive. When businesses cannot forecast their input costs, they delay investment. When consumers see prices shifting, they pull back. Carlson’s point about discipline mattering more than optimization applies directly here: You do not need to predict where tariffs land next month. You need a plan resilient enough to ignore the noise.
Then there is artificial intelligence (AI), which BMO’s Robert Kavcic describes as the question equity markets are desperately trying to figure out. The research lays out three scenarios: a benign singularity where scarcity is solved and per-capita wealth explodes; an extinction event; and the historical reality where technology drives modest productivity gains with some lasting labour market disruption. Kavcic and most other top economists are placing their chips on the third of these scenarios.
Carlson’s advice is apt: Strong opinions are loosely held, so wait for the evidence before planting a flag. What’s already visible, says Kavcic, is that capital has rotated away from speculative AI names and into other sectors like financials, utilities, and consumer staples. For diversified portfolios, that rotation is not a warning sign — rather, a sign the plan is working.
What you can do: The premium on liquidity
After all of the above, the practical advice is actually quite straightforward. Make sure you have liquidity. That is: enough accessible cash to cover three to six months of living expenses without touching your investments; and any planned withdrawals in the next one to two years sitting in stable short-term instruments, rather than exposed to market swings. Investors without this buffer face a terrible choice when markets drop — of selling at the wrong time, locking in losses, and missing the recovery. By contrast, investors with the buffer can sit still, wait, and, if prices fall meaningfully, buy quality assets at lower prices.
Carlson puts the behavioural side of the above simply: Doing nothing is the right decision when your plan calls for it. For Canadian investors with registered accounts, continuing to make Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) contributions through a downturn means buying more units at lower prices.
That is not passivity. That is one of the most powerful compounding advantages available to you, and it requires nothing more than not reacting.
What we are not recommending is selling your portfolio, moving to cash, or making dramatic changes. The S&P 500 dropped nearly 20% during the Gulf War and fully recovered. The Russia-Ukraine conflict produced a painful 2022, but patient investors who hung in were rewarded. Tariff disruptions have occurred in every protectionist era, and supply chains have always adapted.
In each of those episodes, the investors who came out worst were those who sold in the middle and then faced the harder question of when to get back in.
As cited by Carlson, John Templeton once wrote that an investor who has all the answers doesn’t even understand all the questions. Right now is a time for more questions than answers — and the investors who acknowledge this tend to make better decisions than those who convince themselves they have it figured out.
We’ll keep watch so your plan can stay on track
Carlson also cites Peter Bernstein’s description of the essence of risk management as maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control. At Ciccone McKay, that is exactly our approach right now. We can’t control geopolitics, court decisions, or where oil trades tomorrow. We can make sure your plan is built for uncertainty — with the right mix of diversification, liquidity, and time horizon.
If you’re feeling uneasy or you have a major purchase, retirement date, or cash need coming up, reach out to us. We’ll review your plan and make sure your short-term cash needs are covered without disrupting your long-term strategy.
Important note: This blog post is intended for general informational purposes only and does not constitute personalized investment advice. Please speak with your advisor to discuss your individual financial situation. Sources cited are third-party publications and do not represent the views of this firm.
References
- BMO Economics. (2026a). Conflict with Iran: Economic implications [Special Report]. BMO Capital Markets.
https://economics.bmo.com/en/publications/detail/5f292f10-86b4-40cc-83dd-3c2f08411cc0/ - BMO Economics. (2026b). Does a K-shaped economy make the U.S. more vulnerable? / Follow the bouncing tariff ball [Viewpoint]. BMO Capital Markets.
https://economics.bmo.com/en/publications/detail/e6f2eaba-d698-46e1-91ef-bdd7bd18278d - Carlson, B. (2026, March 1). 10 rules for dealing with uncertainty. A Wealth of Common Sense.
https://awealthofcommonsense.com/2026/03/10-rules-for-dealing-with-uncertainty/ - Kavcic, R. (2026, February 27). AI war or peace? [Global Equity Weekly]. BMO Capital Markets.
https://economics.bmo.com/en/publications/detail/9f143af5-43b7-46c0-ba2a-83f9a2acd1dd/
