2010 Market View
Opportunities from Adversities
Justin Urquhart Stewart, leading financial commentator and founder member of Seven Investment Management, in an exclusive article for Willis Owen investors gives his view of 2010.
After the appalling financial destruction and the worst UK recession since records began, it is quite understandable that many investors are fearful of returning to any form of investment in any short order. However, following every fiasco there are always likely to be opportunities and so I would urge investors to come out and look hard at what has changed, and to try and take advantage of this new era.
I think in years to come we may well look back at 2009 as being a fulcrum year when influence in the global economy shifted to both the Eastern and the Southern hemispheres. It is not that the older mature economies of the North and West are doomed or dying, but that the growth of the global economy has shifted and the economic world has tilted on its axis.
An issue not to ignore is the amount of economic investment and stimulation that has been pumped into the global economy. The big question for 2010 will be when will the authorities pull back on the stimulation and what effect will it have on those economies? If pulled too early then we could slip back down the slope: left too long and the spectre of inflation could stalk the land again.
However, one area we can certainly see continuing to benefit from such investment will be the need for longer term infrastructure building. This is not just an issue for developing nations, but also for the mature Western nations having to replace and upgrade their ageing national skeletons. This is going to lead wise investors towards some of those often seen as rather dull engineering groups that provide the key tools and equipment for developing these huge infrastructure projects.
Here we can see a far more reliable line of expenditure not reliant upon the fripperies of the fashionable consumer, based often on more necessary expenditure for the vital functioning of the nations’ arteries. Whilst these may not seem to have the glitz of fashionable high growth investments, they have a level of reliability of growth and often with the compounding benefit of more reliable dividends.
So, as global growth returns, economies will start to pick up albeit at various different rates. So take a global view and spread your investment monies across a multi-manager scheme that gives you the breadth of scope and variation.
Now, therefore, what should we be doing as individuals? Unfortunately it is often the habit of many of us that we need a period to regain our poise and confidence before returning to our regular investing and saving. It seems to be the curse of the private investor that they are doomed to buy at the top of the market and sell out at its deepest pit.
Nearly all investors I find try to wait to try and find the right time to invest. History has taught us that no one can reliably and consistently time the market – so don’t!
There is a natural and quite understandable fear for many clients after what has happened over the past year, however now is the time to ask yourself one simple question – is it going to be better in five years time? To which the answer is probably yes, although quite realistically not as good as it was five years ago. Thus the direction must be not to sell out when those around are fearful, but rather start to drip feed monies back into a broad range of well asset allocated investments. This shouldn’t be done out of traditional dogma and belief, but rather a solid view that there is going to be growth in the world and that you can both support and benefit from it with a cool calm view of the investing world.
Carpe Diem – Seize the Day.