Stock Markets. Is This Time Really Different?

Many investors may feel that it’s best to stay out of the stock markets for now, particularly at a time of so much instability. Are they right?

The markets are unpredictable at the best of times, but these days the list of prevailing uncertainties goes on and on: oil prices, terrorism, the Middle East, China, North Korea, Brazil, “Brexit,” the U.S. presidential election, the world economy and more. This time, you may think, it’s so different that the risks of losing money in the stock markets are all the greater. Much better, therefore, to wait until the future clears.

Following this Godot-like advice, however, would be to disregard the late—and great—Sir John Templeton’s warning that “this time it’s different” are the four most dangerous words in all of investing. And expensive, too, in terms of lost opportunity!

He’d doubtless also remind us that the future is never clear. And that those “losses” when the stock markets pull back are merely on paper, only becoming real losses on what could be an ill-judged sale.

Far better in Sir John’s view to keep on investing in the sure knowledge that the timeless, self-adjusting market cycle has a wondrous way of working things out and bringing economies and stock markets back into equilibrium, and on to their next move upward.

He’d also remind how bear markets are born at the heights of euphoria, bull markets in the depths of despair. Thus, the insane tech boom of 2000–01 was to usher in this century’s first bear market; and the despairing spring of 2009 was the precursor to a bull market so powerful that stock market benchmarks rose by factors of two to three times.

Could the same be happening after the unnerving opening months of 2016? I think Sir John would argue unequivocally—yes. And I believe that this volatile period would also uphold his unwavering belief that “time in,” rather than “timing,” the markets is a much more important way to go about superior long-term investing.

Ignoring these four words can also be painfully expensive in other ways; for example, not trimming one’s holdings at market heights and, perhaps even more importantly, not buying or adding to desirable investment bargains at market lows. All, of course, always undertaken according to well planned and executed investment strategies while remaining steadfastly on course, and perhaps adding Sir John’s favourite word, “fortitude.”

Templeton’s caution serves as a timeless reminder of what a disciplined, well-planned, longer-term approach to investment can bring.  Agreed, precise market timing can never be easy: But in the sure knowledge that stock market developments are never altogether different, why not take Sir John at his proven word?

And, for gun-shy Canadians, why not keep on investing in a “new-look” Canada of exciting and investable change, underpinned by stock markets that offer a wide range of world-class investment choice with which to accommodate individual capital-appreciation or income needs, risk-reward tolerances and ultimate portfolio goals of every type and description?

In a career spanning over fifty years, Michael Graham has held senior research, strategy and sales-support positions with leading Canadian investment firms.  He currently heads up Michael Graham Investment Services Inc., and takes special pride  in his “elder statesman” role as an ambassador, investment commentator and spokesman across Canada, in the U.S. and globally.

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