However, if your foray into share investing is part of a longer-term strategy, you’ve got a more difficult decision to make.
If you’re in this camp, you’ll presumably want to re-enter the market when all this blows over.
That means you’ll not only need to decide whether now is the right time to bail, but also when you should get back in.
We usually think of a correction as a period when the sharemarket falls more than 10% from a recent peak.
For the S&P 500 index in the US, there have been 12 such occasions since 2000.
The average decline across all 12 has been 20.8%, with an average duration (from top to bottom) of eight months.
Four of those 12 corrections have turned into a bear market, which is generally considered a decline of 20% or more.
Three of those came after US recessions – during the dotcom crash of 2000-02, the GFC in 2007-09 and the pandemic-related lockdowns of 2020.
The fourth came in 2022, when the US Federal Reserve lifted interest rates from near-zero to a 20-year high of 5.50% in the space of 18 months.
That was in response to high post-pandemic inflation, and although no recession was declared, it was a very challenging period.
The sharemarket falls were much bigger in those four examples, whereas the other eight brought an average decline of 15.3% with an average duration of four months.
The first point to note is that these periods come quite frequently, so we need to get used to them.
In rough terms, a correction is likely every two years and every third one of those might turn into a bigger decline.
History also tells us that when things turn from slump to recovery, they can turn very quickly.
In the first month after the bottom, the average return across those 12 examples is 13.2%.
After three months it’s 24.9% and after 12 months 35.8%.
Unless you’re extremely good, you won’t recognise a market bottom until it’s behind you.
That means by the time you jump back in, you’ll have missed a fair whack of that rebound.
Financial markets look forward.
They take all the information at hand, form a collective judgment about the future, then factor that into today’s prices.
Right now, prices are reflecting increasing challenges on the horizon, even though we haven’t seen all of those show up in the economic data or earnings releases just yet.
Higher fuel costs, slower economic growth, rising inflation and the potential for tighter monetary policy – that’s an ugly combination, which is why investor sentiment has turned negative.
It’ll be the same on the way back up, and the trough will come long before we see firm evidence of a clear path ahead.
The US market fell 18.9% after last year’s tariff announcements, but the decline started well before “Liberation Day” on April 2.
The market bottomed just four trading days later and started recovering, long before the actual impact of the tariffs had time to feed through.
It’s impossible to predict if the conflict in Iran will subside or reignite, or to pinpoint how markets will react.
At some point markets will stabilise and then recover, as they always have, and nobody rings a bell to tell you when that is.
Whether you get off now or stick around for the ride is up to you, but first consider what you’re trying to achieve and if you’re good enough to also get back in at the right time.
You might be better off to strap in and stay put.
Mark Lister is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.