This week rather than our usual market update, we thought we’d try and put some perspective on what’s happening in markets in what truly is an unprecedented time in our history. We are now getting deeper into this pandemic, this is a once in a lifetime public health emergency. From an investment perspective this is called a “Black Swan” event, something you thought was impossible, until you witness or are part of one.
Stock markets/humans have acted as one would expect, negatively. The stock market is best viewed as a story, as the story changes, the prices change. At the moment the story is very negative, when the story changes the prices will change again. The stock market overreacts in both directions. This is because the markets feed off two powerful human emotions, that of fear and greed. We don’t know when the market will ‘turn’ and if anyone tells you they do, ignore them, it’s not an untruth, it’s a lie.
If you are a client of Wallstone, you will already have a well diversified portfolio, built with your long term goals and objectives in mind. This has been constructed to cope with the deep temporary declines we are experiencing now. We have always approached investing on the basis that storms will come…….well, now one is here. Most of us never leave our house during a storm, we wait until it passes and on this occasion, we would implore you to be patient.
We understand that it’s painful to watch a portfolio decline but as an observer of markets, history and more importantly human nature, we know that the correct thing to do is ‘do nothing’ and this will see us all through. We have enough to deal with through the change and disruption of our normal lives, let’s not compound the issue by making grave financial mistakes with our investments.
The nature of risk is that you don’t see it coming, but on a positive, we also have a globally connected world and have all the utilities and resources needed to address this head-on. We’ve already witnessed significant intervention from governments and central banks around the globe to stave off the economic impact of Covid-19 with the US announcing just this morning practically unlimited stimulus to support global financial markets.
At times like this, it is useful to remember that when the stock market rises you don’t ‘win’ money, just like when it declines you don’t ‘lose’ money. You only lose money when you commit the worst financial action an investor can make, selling a portfolio in a declining market. This is the action reserved for the DIY investor, day traders and the financially failed investor. And to repeat Sir John Templeton’s quote from the first page of our Investment Philosophy brochure;
“The four most costly words in investment are………..this time is different”
Whilst this may feel different and is unprecedented in modern times, capital markets will prevail and will recover as they have done so following numerous previous ‘Black Swan’ events.
If you are investing every month (which many of you are) this is a deep temporary market sale, which is good news for your automatic monthly investment premium.
There will be some good from this crisis:
Conscious spending, do we really need certain things/items in our life?
Focusing on what’s important, people to spend our time with, places to go and things to achieve;
A focused desire to becoming financially free sooner rather than later and following our dreams whilst we still can;
The unbridled joy of giving or receiving a big Irish hug!
Lastly, we know that many of you like to keep up to date with our Weekly Market Update and Weekend Financial Press Update so we’ve included both links below as normal.
Stay Safe, Stay Positive and Stay In Touch