Boris, Trump, Brexit, behavioural economics, Media optics, and the Markets.
Some of my recent blogs about the markets have advised clients that most commentators would advise cautious equity exposure over the last 2 to 3 years. Yet the Dow Jones has moved to a bull type market with growth in the US been driven (amongst other things) by Trumps tax incentives and infrastructure drives. Behavioural economics has been defined as ‘a method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making’. If we were to take a look at the human behaviour of our main world leaders, one could definitely say that their behaviour has a major insight on our economics. This can be said to be true over the centuries but as we now live in a digital world where globalisation rules the roust, our leader’s behaviour could be said to be even more influential.
‘Well, I don’t know why I came here tonight
I got the feeling that something ain’t right
I’m so scared in case I fall off my chair
And I’m wondering how I’ll get down the stairs
Clowns to the left of me, jokers to the right
Here I am, stuck in the middle with you’
These are the lyrics of a song by Steelers Wheel, written in 1972, called ‘Stuck in the middle with you’. It could be said to sum up where we are today in terms of geo- political positions. Who are the clowns or the jokers, but like or not we are definitely stuck in the middle with them. Boris seems to think everything is feasible but perhaps in real terms he seeks to be just ‘plausible’ with no precise content. His media optics are contrived and controlled with one media outlet allowed to ask a question at each public event. The October deadline on Brexit with the consistent reminder of a no deal exit has increased market volitivity. Trump is Trump, and with the 2020 election not that far away, his focus on all things economic will center around his re -election. Looking at the Markets, Equity markets drifted somewhat yesterday. Earnings reports have seen a pullback in market results. Focus again will turn to the Fed and possible rate cuts this week, with markets expecting to 25bp cut. Meanwhile in the UK a December election beacons. Confused??? Maybe.
Our Brokerage is nearly 21 years in operation. Therefore, our clients have experienced over two decades of market ups and downs. Each of our clients have their own individual attitude towards risk which is re viewed as they journey through their working lives. A single 30-year olds view will differ from a couple with 3 kids, as will an individual at 63 retiring at 65. Each will deal with market volitivity differently. However, human nature being what it is, each will want a return on investment irrespective of what level of risk they wish to take. In reality, this is not realistic. You will not get a return on your funds if you continue to invest in deposit like investments. So where can the medium risk individual investment? In my view considering the volitivity that has continued to be part of each daily market shift, clients should not have both feet in the market, but they should have a number of toes. Staying in the market is what is required but not to be over exposed to full equity content in your portfolio. It is interesting to note that if my parent’s investment €1 in the S & P 500 on my birthday over 50 years ago! the value of that €1 would now be worth over €140,000. Now 50 years is a very long investment term, but it does illustrate the fact that market participation plays a part in investment return.