What’s the story? Keeping up with a changing narrative
Did you know that 2019 marks 50 years since we first put a man on the moon? In 1969, the world watched agog as the famous footage of Neil Armstrong was beamed out via black-and-white TVs (plus a handful of colour ones). People listened to the news on their valve radios and read about it in daily newspapers.
Compared with the news cycle we know today – instant, 24/7 and online – the way we consumed news back then seems quaint. While today’s speedier flow of information brings undoubted benefits, there are also drawbacks. First and foremost, we have to constantly process and react to new information.
For investors, that can actually be unhelpful: it’s hard to maintain a sense of perspective when faced with apparently relentless bad news. Similarly, when the news is good, it’s easy to get caught up in unbounded optimism. With new narratives reinforcing feelings of anxiety or overconfidence, staying objective can be a challenge.
Consider late 2018. The UK was on course to crash out of the EU without a deal, while the US ramped up its trade war with China. The world economy slowed, yet the Fed seemed gung ho about tightening monetary policy. These factors combined to fuel a nightmarish narrative that sent markets plummeting, leading US stocks to their worst year since the financial crisis.
But since the turn of the year, markets have experienced a surprising recovery. The Federal Reserve stepping back from tightening and hints of progress towards a Sino-US trade deal have certainly helped.
However, many of the issues that unnerved investors are still unresolved. Yet the downturn in markets seems like no more than a bad dream. This swift about-turn reminds us that stockmarket sentiment is a fickle beast.
Central to our contrarian investment approach is a drive to be dispassionate and unswayed by the emotional narratives than can mis-calibrate investors’ perceptions of risk and reward. That includes taking the swings in the news cycle with a pinch of salt and looking past short-term hype to find long-term value. After all, our investors want to be part of a success story – not a cautionary tale.
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.
Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this blog should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.