Has Fear Turned To Relief? What the Market’s Comeback Teaches Us About Emotion and Investment
After a rocky start to the year, the markets have surprised many by clawing their way back to a positive year-to-date performance. If you’re like most investors, this rebound probably feels less like a victory and more like a sigh of relief. A few months ago, fear dominated the headlines. Portfolio balances dropped, newsfeeds were filled with warnings of recession, and the gut reaction for many was to move to cash or reduce exposure to risk.
That fear was real—and valid. But now that we’re on the other side of the dip, this moment offers a rare opportunity in investing: a second chance to do the right thing.
The Psychology of Pullbacks
Behavioral finance teaches us that losses hurt more than gains feel good. This concept, known as “loss aversion,” is one of the most powerful forces in investing. When markets fall, our instincts tell us to retreat and protect what’s left. We often forget that volatility is part of the deal we signed up for in exchange for long-term growth.
During the downturn earlier this year, many investors discovered something important: they weren’t as comfortable with risk as they thought. That realization can be painful, especially if it came with impulsive decisions or sleepless nights. But it’s also valuable.
Now that the market has recovered, we have a chance to revisit those feelings with a clearer head.
Risk Tolerance vs. Risk Capacity
There’s an important distinction we often talk about with clients at Sevey Wealth: risk tolerance is how much risk you feel comfortable taking; risk capacity is how much risk you can afford to take, given your financial situation.
During calm markets, it’s easy to overestimate your tolerance. But when volatility hits, your emotional reactions tell the truth. If the recent pullback made you anxious, panicked, or second-guess your plan, your portfolio might be out of alignment with your true risk tolerance.
Conversely, even if you can afford to take more risk (based on your age, income, or goals), you might not want to. That’s okay. A good plan respects both your financial numbers and your emotional comfort.
Looking Ahead: More Volatility Is Coming
While the recent rebound is welcome news, we’d be naïve to think that volatility is behind us. Markets will continue to fluctuate, headlines will keep coming, and fear will resurface again. That’s not a flaw in the system—it’s how markets work.
The good news is, you don’t have to be caught off guard next time.
This is the moment to reassess:
Did your portfolio match how you felt during the downturn?
Were you able to stay the course without stress or second-guessing?
Is your current strategy aligned with both your goals and your gut?
A Thoughtful Reset
At Sevey Wealth, we believe in helping clients build portfolios that not only perform well on paper, but feel right in practice. That means balancing risk and reward in a way that respects your life—not just your returns.
If the last few months rattled you, you’re not alone. But the fact that the market has bounced back gives you the chance to act with clarity, not fear.
You rarely get a second chance in investing. Let’s use this one wisely.
Ready for a Risk Review?
If you’d like to revisit how much risk you’re really taking—and whether it’s still appropriate for your goals and emotions—we’re here to help. Reach out to schedule a conversation. No judgment. Just a smarter, steadier way forward.
