Riding the rapids
Keeping a sense of perspective is one of the hardest things to do. It has always been so, but especially in the 21st century.
David Coombs, Manager of Rathbone Multi-Asset Portfolio Funds and Head of the IFA Investment Team
When I grew up (and for most of my life), news was a heartbeat. There was a rhythm to it: one newspaper in the morning, maybe another one in the afternoon if you were in a city, and then the 9 o’clock news at night. Today, news is like a river, constantly flowing with pop-ups on your computer screen and vibrations in your pocket. Everything is so immediate and urgent and trumped up and overwhelming.
Our world is complex, ever-changing and yet, if you sit back and take a breath, comfortingly familiar in its rhythms. People, across the world and through the ages, tend to have the same dreams and fears. We all want to be comfortable, entertained and to provide for those we love. People have forever had similar reactions to prosperity, adversity, injustice and inequality. We get giddy and over-exuberant when times are good, afraid and confused when times are bad. We are incensed by unfairness, and there’s no injustice quite like feeling you’re hard up while your neighbour gets to live the good life. Our response to inequality is primal: it turns out apes feel the same way. When scientists gave some orangutans cucumber for doing chores and others grapes, the slighted group started throwing their displeasure around the room.
Looked at this way, the West’s political unrest and culture wars are the natural reaction to burgeoning inequality over the past 10 years. This isn’t anything new and it certainly isn’t the worst reaction we’ve ever seen. Of course, this has implications for how societies proceed from here and therefore for investments, but the argument that our world is going to hell in a handbasket is a little over-absorbed in the present.
As investors, we tend to be focused on absolute growth in our economies. The greater the overall market, the better it is for business. And businesses drive the gains in living standards that have propelled us from ham radios and outdoor toilets to mobile phones and those fantastic waterfall showerheads. But we mustn’t forget that we are human! Despite stratospheric improvement to everyone’s quality of life, jealousy and a sense of injustice will burn just as fiercely in those who are left behind relative to the winners. It is a great paradox that shared periods of widespread poverty and pain tend to be more cohesive for communities than unequally distributed booms. It’s the difference between the unity of the Blitz and the divisions of the 1980s.
Paul Donovan, a UBS economist, made a fantastic point recently: economic forecasts are “neither accurate nor precise”. As he puts it, economists use decimal points in their estimates to show they have a sense of humour. These are wise words and they remind me of a pivotal lesson: the future is always uncertain. Sometimes we take economic data and forecasts too literally. They are typically flawed and incomplete and sometimes misleading, but they are still valuable. It’s not about getting it perfect, it’s about the direction of travel. That sense of direction helps us determine how people’s attitudes may change over time, because markets are just aggregations of those feelings of optimism, pessimism and everything between.
It has become fashionable to “wait till uncertainty has lifted” before making any decision. But you can’t spend your days waiting to see how tomorrow pans out. Your life and your investments will go nowhere.
Well, here I was trying to talk about perspective and I ended up talking about chimps, showerheads and data. I guess what I’m trying to say is that life goes on, in its ordinary way, so you can’t get too wrapped up in the here and now. Take a step back and see where we’ve come from, that way you may be able to spot where we’re headed.