Right now, the world really does seem a complete mess. Stock markets around the Globe have been in ‘reverse’ mode for all of this year so far and you would be completely forgiven for thinking the gloomy results for portfolios is now written in stone.
We have our quarterly Proactive and Pro-Ethical reviews starting next week and we shall be in touch with a full update on your portfolio by the end of this month. However, I wanted to just send out a very quick encouragement note before a more in depth analysis in a couple of weeks’ time.
We are currently having to deal with massive levels of inflation which has driven central banks around the world to raise interest rates. This has a negative impact on Bonds which are usually the ‘insurance’ part of more cautious portfolios as they tend to go up when Equities go down.
In this case, Bonds have been tumbling just as Equities have also fallen in response to a harsh ‘lock-down’ in China and Russia deciding to invade their neighbour.
As you can see by the state of all my wrinkles – I have done this job for rather a long time! Over the past couple of decades, I have seen multiple ‘complete mess’ times in the world. From the dot com bubble, to 9/11 to regime change in Iraq, I cut my teeth on some ‘interesting’ times for markets.
I can state with utter certainty that each time felt somehow different and we honestly never knew when the dark time for markets would end – but it always did. I can also state with utter certainty that markets recovered – and they did so with such ferocity – it was impossible to catch the recovery in time or to correctly predict it.
My clients probably get tired of my constant mantra that investing is a long term commitment. It is dangerous to set out with a long term investment strategy – only to then change course after just a year or two.
In my experience, the people who make money in life are invariably those who buy from the weak and sell to the greedy. I firmly believe that it is my duty to prevent my clients from becoming subject to either emotion.
So has investing been worth it over the past five years then?
Let’s have a think. Since 2017, markets have had to endure the fallout from Brexit, a hung UK Parliament, a Vote of ‘no confidence’, UK Elections, US Elections, open Rioting on the streets of so called Western Democracy, a Global Pandemic, being Locked in our Houses, the Great Reopening, Rampant Market Crashes, Rampant Inflation and the threat of Nuclear War with a massive military power causing Humanitarian harm on a historically terrible scale – all at the same time that Oceans have been filling with plastic, Forests have been burning, towns have been Flooding and children in inner cities have been dying from Pollution. Just to name a few challenges.
How on earth could portfolios make any money during such a terrible five-year period?
Well the numbers don’t look amazing right now, but the ‘average’ return (according to FE fundinfo) across all of our model portfolios over 5 years is currently around +21.66%. Granted, this isn’t anything to jump up and down about – but it’s still far better than bank account returns over that period. Whilst the past is not always a guide to the future – such a grim past still delivered growth.
The simple answer is that the markets put on more weight during the good months than they lost during the bad ones.
There is no getting away from the fact that these past years have been truly challenging. However, there will come a point where some of the challenges reduce and then we fully expect markets to pull upwards at just the point when no one really expects it.
I will address these challenges in my Market Commentary in a couple of weeks I promise. In the meantime, I am proud to say that 100% of our clients at Thomas and Thomas have agreed to ‘stay the course’ and ‘stick with the plan’.
History teaches us time and time again that this patience will pay off.
I know it’s really worrying right now but I am with you through every twist and turn and I am completely confident that we will be able to celebrate far better gains in future.
Please don’t suffer in silence! If you would like to just ‘touch base’ and chat anything through – just let me know. You are crucial to us as one of our much treasured clients.