12 Feb I May Have Figured It Out…
This year, I took my time before writing my annual column on the stock market outlook. The increasingly constant geopolitical tensions, the new ecological awareness of young people and our politicians, the recurring fear of a recession, etc. prevented me from gaining a firm grasp of the situation. But today, in the light of the coronavirus health crisis, I think I have understood.
I have realized that the media will gain more influence over the stock markets with journalists, who do not necessarily have an economics background, fuelling stock market volatility. By over-informing investors and sensationalizing the news, the media stir up a lot of unrest and panic. Fortunately, the turmoil is short-lived and occasionally generates opportunities.
Currently, economic activity is slowing down sharply after the 1000 unfortunate victims of the coronavirus were likened in the media to the 50 million deaths of the Spanish flu of 1918…
I have also understood that stock markets and investors are resilient. Even after recording hard-hitting incidents, they recover very quickly in an economically feasible way.
Having said this, here’s how I’m going to invest in 2020: I’m going to continue diversifying my portfolio, I’m going to be active, even proactive, and I’m going to further shy away from the public markets.
This means hiring investment managers likely to recognize reasonably valued, quality companies that will be aligned with the trends that are dominating the economy, such as cloud computing or demographic change.
From a regional perspective, emerging markets inherently have more long-term growth than other regions, but I still favour the United States, which is home to a large number of companies with good growth potential. Slow growth, moderate inflation and an accommodative Fed could allow the business cycle to stretch out far beyond what most people imagine. It would therefore be very unwise to underweight this market.
And since major geopolitical crises, either real or fabricated by the media, could unfold, I will strategically hold on to gold, not gold stocks, but actual physical gold. However, I would like to point out that over an extended period of time, a “risky” portfolio will outperform a “safe haven” portfolio containing gold bullion, albeit at the risk of considerable short-term volatility which may make some investors uncomfortable.
Lastly, in order to distance myself a little more from the stock markets and return to the fundamentals of investing, I will continue to invest and have my children invest in real, tangible assets: real estate, agricultural and building land, forest, gold and silver (metals), works of art, etc.
Intrinsically, these assets have safe haven value, heritage value, growth value, yield value and leisure value. The 5 V’s (5 values) are key when choosing a long-term investment.
A word to the wise is enough.