How to react to market surprises

2023 was a year of surprises. Some of them were good: major economies dodged recession, inflation began falling rapidly, and markets were buoyed by talk of rate cuts and AI hype. But some were far less positive: the collapse of Silicon Valley Bank triggered banking sector turmoil in March, while the Israeli-Hamas war heightened geopolitical tensions. 

Unexpected events are common, but the market movements that follow can be almost as surprising as the event itself. Sometimes, markets overreact in the face of a surprise, with prices swinging dramatically, only to correct themselves by the end of the day.