24 Feb 2017

The 24/7 media cycle has it as the worst thing to ever occur in financial markets.  Those who are paid to have an opinion are outdoing each other for headlines and hyperbole.

I’m sure however we’ve been here before.

Remember all the below problems that were bound to destroy the world’s financial markets. Does anyone remember Grexit? No, how about the US government ‘fiscal cliff’? US Budget standoff? The US losing its AAA credit rating?  The GFC?  Tech bubble? Y2K?  War in Iraq?

The world seems to still be turning and the markets continue to operate.  Good companies will continue to be good companies and profits will continue to be made.  Dividends will be paid.

Now, the above-mentioned people paid to write their opinions will be screaming for you to sell and go to cash, exactly as they did in 1987, after the tech crash, after 9/11, after the GFC.

The result of moving to cash and being out of the market over history?

Pretty much always wealth destroying.  Do you think this time will be different?

There’s never a shortage of reasons to worry.  Volatility is a fact of life in investment markets.  The bottom can’t be picked, the top can’t be picked.  Don’t succumb to those who tell you it can be.  Short-termism is the death of wealth in markets.  To quote Warren Buffet, “the stock market is a device for transferring money from the impatient to the patient.”

 

Simon Davis

Partner

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