We were looking through readership stats for our blogs, webinar and website visits and they jumped significantly through January and February as financial market volatility was peaking. Certainly the fear factor was driving investors who wanted to understand what was happening in the markets and in their portfolios.
The last few weeks have seen significantly less volatile financial markets and I suspect (although we have not yet seen the data) that fewer of you are feeling as vulnerable and have moved your focus to other matters.
We have, by virtue of the speed of information that is available today, become a generation of less patient people.
History tells us that all things economic are cyclical, but we are nevertheless, in our current state of mind not prepared to wait for the cycle to evolve.
I have talked about human behaviour and the impact on things financial in previous blogs, most recently about our expectations of the potential (and perhaps the need) to see our investments and portfolios continue to grow as we had seen them grow over the 2009-2014 time frame.
If we have economic growth that is increasing at an annual clip of about 2% in the developed world and perhaps 4% in the developing world, we do have to align our expectations of what is reasonable growth in our portfolios (especially when it comes to the equation for determining what risk is associated with achieving certain returns) to this reality, which is considerably less than what we had become used to.
Today's US Employment report was typical of the kind of data we have been seeing: a letdown for those hoping that it might provide clues as to the direction of the US economy (more jobs, but lower paying jobs) and what implications this might have for US Federal Reserve interest rate decisions and on a broader scale, financial markets and investor portfolios. In other words, it is not, apparently, evolving at a pace consistent with our desires.
So little has changed, except that, as will always happen, financial markets over-reached (became oversold) through January and early February. Subsequently from short-covering and some value hunting (for cheap assets) in the midst of all of the fear, there has been some return to better prices.
Short-term we continue to worry about more volatility (all of our themes for 2016 remain, visit our latest weekly webinar at http://www.highrockcapital.ca/current-edition-of-the-weekly-webinar.html for more detail), but longer-term we know that the cycle will evolve as it always has and in time we will return to the historical averages for growth and returns.
As portfolio managers our job is to make our best determination as to where we are in the cycle and look for opportunities to buy assets that become undervalued and of course sell assets that have become over valued.
Most importantly, we have to fight our natural tendency to want this all to evolve at a quicker pace. We have to remain patient and let events unfold as they inevitably will and only then act accordingly.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist