The Impact of Uncertainty on Investing

Any time you put money at risk in an attempt to profit, there is an inherent level of uncertainty. When new threats such as war or recession arise, the level of uncertainty increases significantly as companies can no longer accurately predict their future earnings.

As a result, institutional investors will reduce their holdings in stocks considered unsafe and move the funds to other asset classes like precious metals , government bonds, and money-market instruments. This sell-off, which occurs as large portfolios reposition themselves, can cause the stock market to depreciate.