In our modern, technological and social media filled lives, distraction is usually considered a bad thing. Hours of trawling through a Facebook or Instagram account, or finding yourself down a virtual rabbit hole as you research a topic on the internet clicking from one page to the next. It is true – one can get distracted by these activities – and social media is not what I am thinking about when I think about the art of distraction. According to the dictionary, distraction is something that prevents a person from concentrating on something else. And sometimes, you need to be distracted from things that you have no control over.
The global macro-economic climate and as a result, stock markets everywhere feel as though they are collapsing in a heap. There is so much information available and opinions are created and changed with every data tick that comes out. Today, the news of inflation is less scary than the news of a recession, and the market rallies on the expectation that the Federal Reserve may cut interest rates. Tomorrow, the opposite and the market falls. The news and analysis are relentless.
And this is where distraction becomes a tool. There is a time to hone your golf skills, to take up art classes or learn to bake to perfection. Anything to stop you looking at the value of the portfolio every day or every hour!
The price of most assets have fallen to a point where it doesn’t make sense to sell them – unless you are expecting Armageddon with no return to normalcy. Economies will right themselves and prices will recover. The darkest hour is before the dawn, and it feels pretty damn dark at the moment. The IMF has downgraded global growth for next year, high profile commentators are warning of the worst – a recession to end all recessions. As the data presents itself and I try and sift through the noise, I do think that there is more bad news to come. It looks now like inflation will affect wages, and when wages rise to accommodate the cost of living there tends to be an upward inflation spiral. Interest rates may well stay elevated for a while longer. That is not necessarily a bad thing. After decades of low interest rates, savings will start to earn a return.
Markets tend to be forward looking – they anticipate how the economy will behave. Besides the day to day noise, the market tends to see through the worst before it happens and quite often start to perform in advance of the economy. There are companies that do well in an inflationary environment – especially if they have healthy balance sheets and are not crippled by debt. Fund managers should be watching the signals and will position their funds to take advantage of the downturn – rotating into stocks that have been overpriced in the past, or unattractive in a different environment. It doesn’t happen overnight, but small tweaks to their portfolios should set them up for the next bull rally.
Each of us has our own distraction, and now may be the time to revel in it. Birdwatching, playing a musical instrument, drawing or painting, gardening. I hope this inspires you to focus on something that makes you happy – and try not to focus on the bottom line of your portfolio statement. I know it is ugly, and I know it is disconcerting, but I am confident that if we can stay the course, we will be well positioned for the next upswing.
The Art of Distraction
In our modern, technological and social media filled lives, distraction is usually considered a bad thing. Hours of trawling through a Facebook or Instagram account, or finding yourself down a virtual rabbit hole as you research a topic on the internet clicking from one page to the next. It is true – one can get distracted by these activities – and social media is not what I am thinking about when I think about the art of distraction. According to the dictionary, distraction is something that prevents a person from concentrating on something else. And sometimes, you need to be distracted from things that you have no control over.
The global macro-economic climate and as a result, stock markets everywhere feel as though they are collapsing in a heap. There is so much information available and opinions are created and changed with every data tick that comes out. Today, the news of inflation is less scary than the news of a recession, and the market rallies on the expectation that the Federal Reserve may cut interest rates. Tomorrow, the opposite and the market falls. The news and analysis are relentless.
And this is where distraction becomes a tool. There is a time to hone your golf skills, to take up art classes or learn to bake to perfection. Anything to stop you looking at the value of the portfolio every day or every hour!
The price of most assets have fallen to a point where it doesn’t make sense to sell them – unless you are expecting Armageddon with no return to normalcy. Economies will right themselves and prices will recover. The darkest hour is before the dawn, and it feels pretty damn dark at the moment. The IMF has downgraded global growth for next year, high profile commentators are warning of the worst – a recession to end all recessions. As the data presents itself and I try and sift through the noise, I do think that there is more bad news to come. It looks now like inflation will affect wages, and when wages rise to accommodate the cost of living there tends to be an upward inflation spiral. Interest rates may well stay elevated for a while longer. That is not necessarily a bad thing. After decades of low interest rates, savings will start to earn a return.
Markets tend to be forward looking – they anticipate how the economy will behave. Besides the day to day noise, the market tends to see through the worst before it happens and quite often start to perform in advance of the economy. There are companies that do well in an inflationary environment – especially if they have healthy balance sheets and are not crippled by debt. Fund managers should be watching the signals and will position their funds to take advantage of the downturn – rotating into stocks that have been overpriced in the past, or unattractive in a different environment. It doesn’t happen overnight, but small tweaks to their portfolios should set them up for the next bull rally.
Each of us has our own distraction, and now may be the time to revel in it. Birdwatching, playing a musical instrument, drawing or painting, gardening. I hope this inspires you to focus on something that makes you happy – and try not to focus on the bottom line of your portfolio statement. I know it is ugly, and I know it is disconcerting, but I am confident that if we can stay the course, we will be well positioned for the next upswing.
Asset Class Returns
The table below represents a rolling year view of the major asset class returns that we track. It offers a view of the asset classes we use to diversify your portfolio.