There is plenty to worry about in the world right now, whether that be the global pandemic, the uncertain economic impacts of this recession, the normalisation of interest rates, or what nobody seems to talk about anymore….Brexit!
But if we are completely honest with ourselves, we always have a tendency to worry about something. Bank of America publishes a credit investor survey every month and it always surprises us that the market can come up with such a broad range of things to worry about (as can be seen in the chart below). Now, that is not to say we should disregard these concerns; indeed we should be aware of them within our investment decisions. But we should always be mindful to give them the proper risk weights within our thought and investment processes.
Back in February, we asked the question – “Why do we panic?” The answer is uncertainty. Uncertainty will always be there – after all we are trying to predict the future and anyone that tells you they know what is going to happen is either a liar or a lunatic. We base our decisions on probability and risk-adjusted outcomes. The famous investor, Howard Marks, talks about the market being a pendulum that swings from greed to fear. It’s not always easy to tell where you are.
Expensive markets get more expensive and cheap markets get cheaper, but following a proven, robust investment process and taking a long-term approach (without getting too caught up in the day-to-day noise of headlines) is always a sensible strategy.