Most behavioral finance literature focuses on the wrong moment. The bulk of academic research on investor decision-making during crises examines what happens at the bottom, when fear is at its peak and the temptation to sell is strongest. That body of work has produced the dominant advisor refrain of the last two decades: stay the course, don’t panic, time in the market beats timing the market. It is good advice. But it leaves a gap.

The gap is what happens after the crisis ends.

The Asymmetry Investors Don’t See Coming

An investor who held a balanced portfolio through the six-week period from February 28 to April 7 lived through one of the sharpest geopolitical shocks in recent memory. WTI crude rose 69% over the conflict period. Brent natural gas in Europe rallied 61%. The Strait of Hormuz, which carries roughly 20% of global daily oil supply, was effectively closed for weeks. Equity markets repriced violently in both directions on a near-daily cadence. Holding through that took genuine discipline.

Then, late Tuesday evening, Trump announced the Islamabad Accords — a two-week ceasefire mediated by Pakistan, with Iran agreeing to reopen the strait subject to terms. By Wednesday morning, oil had fallen 14% to 16%, S&P 500 futures were up 2.7%, the Nikkei had closed up 5%, and European indices were rallying nearly 4%. The investor who held through panic woke up to a portfolio that looked materially different from the one they went to sleep with.

The Two Decisions Investors Face
Behavioral difficulty rating: hold-through-panic vs. hold-through-relief
Perceived difficulty Hold through panic Difficulty: 7/10 Hold through relief Difficulty: 9/10 Source: HDQ behavioral framework, applied to 2026 Iran war timeline
Source: HDQ Behavioral Desk analysis

Here is what the research suggests: holding through a relief rally is harder than holding through panic. The logic is counterintuitive. Panic carries pain, and pain mobilises advisors and family members and financial media to deliver the “stay calm” message in chorus. Relief feels like reward. Nobody calls an investor on a green day to remind them not to do anything. The behavioral pressure flips from sell into buy, or sell into trim, or sell into rebalance, and the chorus goes silent.

Recency Bias Doesn’t Care Which Direction You’re Looking

The cognitive shortcut that tells an investor “things will keep getting worse” at the bottom is the same shortcut that tells them “things will keep getting better” at the top. Recency bias is direction-agnostic. It simply extrapolates the most recent observation forward. On Tuesday morning, that observation was an oil price north of $115. By Wednesday morning, the most recent observation was a 14% one-day drop and a coordinated rally across every major index. The brain that said “sell now or you’ll lose more” two weeks ago is now saying “buy now or you’ll miss the rally.” Both feel like rational analysis. Neither is.

The specific risk for Canadian investors is concentrated in the energy sleeve. A balanced TSX-weighted portfolio entered February 28 with roughly 16% energy exposure. By April 7, that weighting was meaningfully higher because energy stocks had outperformed everything else for six weeks. Suncor closed Tuesday at $92.79, with TD raising its price target to C$91 and Scotiabank to C$85 just last week. CNQ delivered similar gains. An advisor with a model portfolio designed for a 16% energy weighting may now be looking at 19% or 20% exposure without having made a single trade.

The Energy Sleeve Drift Problem
Illustrative TSX-weighted balanced portfolio, target vs actual after six-week conflict
0% 10% 15% 20% Feb 28 target 16.0% Apr 7 actual ~19.5% Apr 8 estimate ~17.5% Illustrative model. Energy sector weight in S&P/TSX Composite, adjusted for relative performance
Source: HDQ analysis using S&P/TSX sector weights and conflict-period sector returns

The Question That Cuts Through Both Biases

There is one question that defuses both panic-driven and relief-driven decisions. It is this: would the action you are considering today have been the right call yesterday, before the news broke? If the answer is yes, the news is incidental and the action is justified on its own merits. If the answer is no, what is being proposed is a reaction to a headline, which is the definition of the behavior most likely to underperform over time.

Applied to today’s situation, the question becomes: was rebalancing the energy sleeve back toward a 16% target the right move on Tuesday, with oil at $115 and the strait closed? For most balanced portfolios, the answer was probably yes — drift had occurred, the target weight existed for a reason, and rebalancing is a discipline, not a market call. If that was true Tuesday, it remains true Wednesday. The ceasefire changes the price at which the rebalance happens. It does not change whether the rebalance was warranted.

The opposite case also holds. An investor who was not planning to add to energy exposure on Tuesday should not be planning to reduce it on Wednesday simply because oil dropped overnight. The position sizing decision should be anchored to the portfolio’s design, not to the most recent forty-eight hours of headlines. This is harder to do during a relief rally than during a panic, because nothing in the environment is signalling caution.