Expect modern markets to unsettle you more

By the end of June, many global equity markets had closed the quarter at all-time highs. What that number doesn't convey is what the quarter actually felt like to most investors living through it.

The headlines that pushed through to your phone this quarter were mostly about individual companies. "Timberrrr." "Plunge." Then, within days, "surge" and "rally." That gap, between an index closing at record highs and the company-level turbulence most investors were actually experiencing, has a structural explanation. Individual share prices now swing roughly three times more dramatically than they did two decades ago (see Figure 1). An ordinary results day can send a large company's stock down 10% in an afternoon. The same company can jump 9% three weeks later on a news report. Each of those moves arrives on your phone before you've had time to put it in context, and your nervous system treats all of them as urgent.

According to neuroscientist Dr Stephen Porges, this is neuroception: the nervous system's unconscious threat-scanning that runs beneath deliberate thought and tends to compress your sense of time horizon. The discomfort you feel watching companies sell off is your biology working correctly. The more important question is what has actually changed in the market structure that makes these rounds of alarm flare more frequently and hit harder than they used to.

WHY DID THE VOLUME TURN UP SO DRAMATICALLY?

Something fundamental has changed in how share prices are set. Research from J.P. Morgan and Cboe suggests that valuation-driven investors now account for only around 10% of daily equity volume in US markets. The rest is a mix of passive index flows that buy on size rather than value, algorithm-driven trading that reacts to headlines in milliseconds, and large multi-strategy hedge funds operating under automatic risk limits that can force them to sell perfectly good companies at a moment's notice. Our Head of Personal Investments Pieter Koekemoer explored all four of these forces in our April Notes from my Inbox, which is worth a read if the mechanics of modern markets interest you.

What that structure produces in practice was visible this past quarter. The Philadelphia Semiconductor Index (about which you can read more in this quarter's global fund updates) rallied 88%, its strongest quarter since its creation in 1994. The underlying businesses didn't double in fundamental value in three months. The AI narrative caught the momentum, and a wave of price-indifferent capital followed it.

When most of a quarter's returns flow through that narrow band, the headline index number tells a very different story from what most genuinely diversified investors actually experienced.

WHAT YOUR BRAIN DOES WITH IT

Psychologist Daniel Kahneman (whose work we often draw on in our Insights articles) showed that loss aversion is hardwired: the pain of a loss registers roughly twice as powerfully as an equivalent gain, which creates predictable patterns such as selling at exactly the moment markets are closest to recovery, or chasing capital into whatever performed strongly last quarter. Both make complete instinctive sense as survival responses. They were just calibrated for a world where falling things were generally worth avoiding, and markets work differently.

Consider Auto1 Group, a used-car marketplace and a top equity holding across our global funds. In Q1, its share price fell 46% in USD as markets grew concerned that elevated energy prices would dent European car purchases. Throughout, the underlying business continued to grow and gain market share. The sell-off was driven by sentiment rather than anything that had changed in the business itself. In Q2, as oil prices retreated with the Iran ceasefire, the stock recovered 53%. The Q1 drop and the Q2 rebound are one chapter in what we expect to be a much longer story playing out in our global equity portfolios. That gap between the price story and the business story is where long-term returns are built, but also where holding feels hardest.

The lesson, as with so many similar episodes, is that missing even a handful of the best days in any given decade tends to produce a materially worse outcome than staying invested through the entire period, including the worst ones.

The same tension shows up at the fund level, not just in individual holdings. Coronation Global Managed, our global balanced fund, has compounded at 6.5% per year in US dollars after all fees since inception in 2009, turning $1 million into $XX million by end June 2026, placing it in the first quartile of its peer group across every meaningful time period. Fourteen of the Fund's 18 calendar years have delivered a positive return. The average intra-year decline across all 18 years has been 9%: in 2020, the Fund fell 16% at its worst point and ended the year up 11%. That 9% is the price the market charges for long-term returns, and precisely when it arrives, loss aversion is loudest.

WHY TRAILING STRETCHES FEEL SHARPER THAN THEY USED TO

The past quarter also illustrated a second layer of this problem. The S&P 500 gained roughly 15%. But that masked a striking divide: the semiconductor sector alone rose 88%, while many quality businesses outside that AI narrative went sideways or fell. Same market, very different experience depending on what you owned.

When markets sweep into a single theme – dot-com, Magnificent Seven, now AI – the index concentrates in whatever is rising fastest, regardless of price. A fund holding a diversified basket of quality businesses at reasonable valuations will often trail for extended stretches. History is consistent about what follows. One global holding, ASML, underperformed global equity markets by roughly 40% leading into 2025 before returning approximately 160% in USD over 15 months. We see the same pattern emerging in several current holdings – Visa and Mastercard among them – and the specifics are in this quarter's Coronation Global Managed Fund and Global Optimum Growth USD Fund updates.

WHAT ACTUALLY MATTERS

Our investment approach rests on the same three things it has for 30 years: research businesses in depth, buy when the price falls below what they are genuinely worth and sell when it rises above it, and constantly interrogate our own conclusions.

The alarm that fires when your portfolio lags a surging index is neuroception doing what we described above – a threat signal calibrated for survival, not investment decisions. Recognising it for what it is and maintaining the composure to resist reactive decision-making remains the most useful thing you can do.

A trusted financial adviser earns their place precisely in moments like these, by helping you hold to a process and focus on your long-term objectives when your nervous system is pulling you away.

Volatility is the entry fee the market charges for long-term participation. The investors who came out well on the other side of every prior cycle were rarely the ones who felt less anxious; they were simply the ones who stayed invested long enough for fundamentals to prevail and compounding to do its work.

For a practical guide to building a resilient global portfolio, download our latest Corolab, Investing Offshore, at coronation.com.

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