15th January 2020
Market Commentary January 2020

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We didn’t start the fire

I’ve always been a fan of music and of how it can evoke such powerful emotions and memories. One of my first musical memories was hearing Mark Knopfler of Dire Straits singing ‘Sailing to Philadelphia’ on Radio 2 as I was carted off to school one morning by my mother. I never knew what the song was at the tender age of five, but that memory and emotion came flooding back when I heard the song again many years later. Never did I imagine that one of my desert island discs would be about an 18th century astronomer and surveyor.

Anyway, I’ve been rekindling my relationship with the music of Billy Joel recently. In terms of his best work, it’s a hands down win for ‘Piano Man’ and ‘Vienna’. However, the song that has most resonance with an article about stock markets has got to be ‘We didn’t start the fire’. For those not familiar with the song, it is a chronicle of over one hundred events spanning half a decade that emphasises the sheer volume of significant events that occur in the world on a regular basis. This got me thinking about stock markets and the numerous events that have occurred over the last decade. Many of these events were seen as hugely significant and most led to bouts of volatility in the market as people feared the potential ramifications of them.

Testing my memory of the last decade is tricky after an over-indulgent Christmas but the non-exhaustive list of events includes: the Eurozone crisis parts un, deux and trois, fears over the PIIGS (Portugal, Ireland, Italy, Greece and Spain) status in Europe, the numerous fears over the US debt ceiling, the Scottish independence referendum, four UK general elections, the Brexit referendum, the slowing of Chinese growth, the collapse of the Chinese stock market, the taper tantrum, the end of Quantitative Easing, the first interest rates rises for a decade, the oil price crashing 75%, the legacy issues of the financial crisis, the Ukrainian crisis, and that American election.

Yet here we are. The world is still turning, and the markets are celebrating the best and longest bull run on record. When you’re living through these events, they can be scary, and can seem like the most consequential events in memory. But they’re not. Now, of course they need to be analysed rationally, and you need to ensure that you’re well-diversified and positioned appropriately; but, in most instances, they sort themselves out and present good buying opportunities for the patient investor.

I occasionally wheel out a quote by Benjamin Graham, ‘the father of value investing’, who said that ‘In the short run, the market is a voting machine; but in the long run, it is a weighing machine’. I usually use this as a short-term reminder for one to be stoic in the face of market uncertainty but now use it to prove that it has been correct over the last ten years, correct over the last fifty years and correct over the last one hundred years. Patience is one of the best virtues an investor can have and will continue to be a powerful tool in this next decade.

I’ve got no idea what the coming year will hold, let alone the next decade. One thing I am sure of, though, is that there will continue to be highly significant and potentially scary moments for the stock market. These will provide opportunities for the patient investor and we believe that equities will continue to provide adequate returns above the level of inflation. This year may see volatility as our relationship with the European Union continues to evolve and the Americans undertake another election; but we continue to be positive about the long-term prospects for the world.

I hope to be writing an article this time next year about Yazz and ‘The only way is up’; but if it's about Billy Ocean and ‘When the going gets tough’, then so be it.

Dan Boardman-Weston
Chief Investment Officer