As stock markets continue their march beyond all-time highs the usual concerns start to emerge:
Are stock markets over-valued?
After the boom surely there will be a bust?
What about Trump/Brexit/North Korea/China… etc?
For those who are waiting to invest the prospect reads like a horror movie script. The thought of placing cash into the markets is akin to “going into the cellar to check out those creepy noises” – we all know what happens there!
But a really good horror movie takes its cast through a number of stages before the inescapable disaster plays out. Like any good tragedy, the characters start with a false sense of security where only the audience is aware of their impending doom. Initially the creepy noises are dismissed with rather tenuous practical explanations that the viewers know are ridiculous. This is the unawareness stage.
The next stage is a discomforting mix of realisation and denial – “surely there is no such thing as a cellar monster, despite what I just saw!”. Next is the stage of acceptance, “this is really happening”.
Part of the pleasure of watching a horror movie is the secure knowledge of inevitable suffering coupled with the relief that it is being endured by someone else. Can you imagine how disappointing it would be for a horror movie audience to see the terrified star enter the cellar only to find Mary Poppins rather than Freddy Kruger?
Turning to capitalism for a moment, there does seem to be sustainable growth in the global economy. The momentum is such that events (politics, dear boy) are becoming smaller bumps in the road rather than actual barriers. Not so long ago we had a much more heightened sensitivity to events. The Greek debt crisis, for example, had the potential to knock the whole of Europe off balance back in 2013. These days it barely warrants a mention, despite still standing at over 300 billion Euros
I always thought that capitalism came hand in hand with democracy, a virtuous relationship built around the premise of freedom to vote, free trade and freedom to succeed. But recent events have been far more disharmonious than we have been accustomed to. Indeed, many of us have been through a process of denial and acceptance when it comes to the results of the democratic process. We have been further disturbed by the capitalist success of countries that some regard as being deficient in democratic terms. Could it be that there is more than one way to skin a cat?
With capitalism working in more ways than one the potential for further expansion is certainly there. I appreciate that markets can operate differently to the global economy, but it is also true that they are a good measure of economic success in the long term. Indeed, it is a key premise of investing to think long term rather than attempt to dip in and out of investments in an attempt to get the timing right.
If you have been investing over the last 10 years you will have had a pretty good time of it. For those who have opted out due to fears of another horror movie-style crash, this outcome is more disappointing. The players have found a Mary Poppins when the fearful were convinced it was a Freddy Kruger.
But perhaps more importantly, to find your Mary Poppins you do have to go into the cellar at some stage. The sooner you do it, the more time your investment will have and the more likely you are to see a positive outcome after riding out the peaks and troughs. And the genius of Freddy Kruger is his ability to jump out when you least expect him - almost as if he won’t appear if you want him to.