“An optimist believes this might just be the best of all possible worlds. And the pessimist fears that just might be true.” – Joe Anonymous
By Alan Steel
Today’s financial headlines are peppered with new fears about higher inflation (wasn’t lower inflation a bad thing too?), how Brexit will raise household bills by £260 (crystal balls and round numbers always concern me) and my personal favourite; the EU financial watchdogs are apparently studying the performance of mutual funds…
Eh, aren’t they already supposed to be doing that?
It’s more soul-destroying than a compliance meeting out there. And the associated consensus of bad news confirmation bias continues to run amok, having accrued more followers than Facebook (at far less profit) and obliterating any long-term perspective.
Somehow what’s actually happened has gotten lost in what folks think should have happened.
And so it continues for coming up on nine years post-recession; red ink remains the new black, negative investor surveys are the norm, headlines gallop with lances towards every bubble of stock market growth, and opportunistic politicians throw nuclear-tinged tantrums far from the bargaining tables intrinsic to their craft.
Investors are treating stock markets like they’ve boarded the wrong train and now they’re running along the corridor trying to get off as it pulls away.
And the crescendo of warnings about world stock markets has only grown alongside this eight-year plus bull market and the strengthening global economy.
That’s an odd pairing.
Usually folks begin their path towards enthusiasm and euphoria at times like these. But those sentiments are harder to find right now than the logic driving their opposite emotions.
Always Look on the Bright Side of Life (and Markets)…
For me, I keep thinking about the philosophy of Louis Rukeyser – an American journalist and financial commentator, famous for his pun-filled humor and trying to get investors to ignore the short term gyrations and think long term.
And I’ll wager that the worst thing anybody ever said about Louis was that he was too optimistic.
In investment speak, he was what’s called a perma-bull; always positive about the world economy. In fact, at one point he was called everyone’s favourite economic commentator. The New York Times crowned him one of the most accurate economic forecasters ever.
Even eminent economists were fans, including J K Galbraith and Milton Friedman – the Nobel Prize Winner and the inspiration behind Reaganomics.
But was he right?
What Goes Down Short-Term, Goes Up Long-Term
Well, it was about ten years ago that Ned Davis Research completed an analysis of the S&P 500 Index from 1926 to 2006.
Their analysis showed the stock market went up in 72% of all one-year periods, 87% of all five-year periods and 99% of all ten year periods.
For longer periods, the stock market rose 100% of the time!
And that’s what successful investment is all about; being right in the long run.
Know what else happened about ten years ago? Stock market prices fell, allegedly on the back of inflation worries. Apparently that was down to rising oil prices.
And what’s happened to the S&P 500 over this last decade (including the impact of the 2008/09 recession)?
History has repeated itself, again.
Folks, it pays to be an optimist.
So why not talk to one?