We are past the halfway point of what has already been an eventful year. Persistently high inflation and tight monetary policy remain top of mind. Add escalating conflict in the Middle East and the opening salvos of a new trade war, and the headlines feel heavy.

With all this negative news, you might assume global markets started July deep in the red. In reality, the opposite is true: the MSCI World Index gained roughly 9.5 percent through June. That is a full year of returns packed into just six months!

This year’s pattern is nothing new. The chart below tracks one dollar invested in 1970 through five decades of oil shocks, recessions, wars, and pandemics. Dozens of other crises do not even fit on the page, yet the line keeps rising. The lesson is clear: short‑term chaos and long‑term progress can coexist.

Source: Dimensional Fund Advisors

A portfolio built around just a handful of stocks can be fragile. When a recession hits, the failure rate of businesses rises, and a single bankruptcy can leave a sizable hole in a concentrated portfolio.

Broad diversification changes the math. While it’s inevitable that some businesses in a diversified portfolio won’t survive, the impact is minimal when each holding represents a tiny slice of the whole. As the chart above shows, the broad market is very resilient and has demonstrated the ability to bounce back from turmoil.

For a diversified investor, the key risk is not an individual holding going to zero. The real threat is needing to withdraw cash during a market slump. This is where planning, and an appropriate balance between risk and return, are key. Maintaining a sufficient allocation to cash and bonds provides protection if you need access to your funds at an inopportune time.    

As the famous saying goes, “History is just one damned thing after another.” The first half of this year has proven that markets are no different. History shows us that a disciplined approach can persist over time, even when the headlines suggest otherwise.