Surprise announcements, like today’s move for a snap UK general election, play havoc with what is already brittle stock market investor sentiment. It’s been that way for over eight years now – a near inexplicable emotional state in light of the record breaking market highs, and the relative health of the slow-burn economic recovery that’s been with us since March 2009.
The belief in the idea of instant success and impending disaster is one that’s easily influenced by; fear-inspiring articles, the urge to seek safety in asset classes that don’t actually provide any, falling to victim to well-named products that sound good but don’t really mean anything, and becoming an armchair investor following celebrity TV analysts whose dire investment predictions are borderline comedy.
It’s not all butterflies and roses in equities. The market, by most reckonings right now, is expensive. That’s not to say that there isn’t value out there. There is. In fact, we’ve seen returns on some investments are returning upwards of 40% over the last twelve months.
In the words of legendary investor Peter Lynch, who averaged a 29.2% annual return between 1977 and 1990 while the manager of the Magellan Fund at Fidelity, “You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”