Private vs. Public Market Investing in a Trade War: A Study in Investor Mentality
Trade wars and tariffs dominate headlines, sparking sharp swings in global financial markets. Stocks rise and fall within minutes of a presidential tweet or a new policy announcement. Amid this turbulence, the differences between private market investing and public market investing come into stark relief - not just in mechanics, but in investor psychology.
Public market investments demand a premium for offering liquidity. However, for long-term investors - or those prone to emotional reactions - this liquidity can become a double-edged sword.
The Public Market: A Front Row Seat to Volatility
Public markets are, by design, transparent and liquid. Stocks are priced in real-time, with values fluctuating by the second. During a trade war, tariffs act like shock waves, causing immediate and sometimes exaggerated reactions across sectors - think semiconductors, agriculture or manufacturing.
For public market investors, daily volatility is unavoidable. It's flashing on your screen, on your phone and on the evening news. A single day's losses can feel like a referendum on your portfolio. Even long-term investors can find it psychologically difficult to stay the course when faced with constant noise and price movements.
This visibility often leads to emotional decision-making: selling into panic, buying into rallies, or trying - and usually failing - to time the market. In periods of geopolitical stress like a trade war, public investors often experience heightened anxiety, leading to short-term thinking even when the fundamentals of their investments haven't changed.
The Private Market: Shielded from Daily Noise
Contrast this with private market investing - private equity, direct real estate and private credit, for instance. These investments aren't priced daily, or even monthly in many cases. Valuations are updated quarterly or based on significant milestones like a funding round or asset sale.
As a result, private investors are naturally insulated from daily volatility. They aren't watching their investments whip around 5% because of a tariff announcement. This insulation often fosters a calmer, more strategic mindset - investors are more likely to focus on the underlying growth of the business, the management team's execution and long-term value creation rather than short-term market sentiment.
The lack of visibility into immediate pricing can be a blessing. It encourages patience and discipline - two traits essential for harvesting the true potential of private investments, especially during times of geopolitical instability.
Trade War Impacts: Different Experiences, Different Outcomes
During a trade war, both private and public companies feel the real economic impact - supply chain disruptions, input cost inflation or lost export markets. However, the experience for investors is vastly different.
Often see immediate markdowns - and sometimes oversold conditions - based on sentiment, even if the underlying company fundamentals are only marginally affected. Share price pressure can force hasty decisions.
May only see the impact during the next quarterly report, giving management time to respond to challenges without the overhang of a falling share price or activist investors forcing reactive decisions.
In some cases, this means private companies can adapt more effectively than their public peers - repositioning supply chains, adjusting pricing strategies or pivoting to new markets without the pressure of quarterly earnings calls or short-seller scrutiny.
The Mental Game of Investing
Ultimately, investing - whether in public or private markets - is a mental game as much as a financial one. In a world rattled by trade wars and tariffs, the ability to maintain a long-term focus becomes a critical differentiator.
- Private market investors, by virtue of their structure, are often better positioned to ride out the storm with steady hands.
- Public market investors must cultivate emotional resilience and discipline to resist the siren song of daily headlines.
Either way, understanding how visibility into volatility affects behaviour is key to making smarter investment decisions - especially when the waters get rough.
In a turbulent world, are you better suited to the higher returns and lower liquidity of private markets - or the liquidity and volatility of public markets? Understanding your own investor psychology is as important as understanding the assets themselves.
Quintas Capital advises high-net-worth individuals and families on structuring, investing and preserving wealth across private markets. If you would like to discuss how private market exposure might work for your circumstances, we would be happy to hear from you.