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I was reminded of this fact when reading an article in the Telegraph last week by Tom Stevenson, Investment manager at Fidelity. His research confirmed the following statistics.

“Over the past 100 years or so, the US stock market has been at least 5pc below its most recent peak more than half of the time (57pc). It has been at least 10pc below its latest high around a third of the time. And US investors have been 20pc or more below the peak a fifth of the time. The volatility of the stock market should be seen as the price we pay for the long-run outperformance of shares compared with smoother, apparently safer, but less rewarding assets such as bonds and cash.”

Investing, rather than trading or speculating, means backing companies for their long-term potential and ability to generate cash. Of course, changes in inflation, interest rates, taxes and currency affects business in different ways, but business founders and CEOs learn to adapt and navigate through all these things in order to focus on the success of the business.  

The current bombardment of uncertainty created not just by Trump’s rhetoric, but also western government’s spending plan’s means the threat of inflation is rearing its ugly head again at a time we had hoped it was tamed. Inflation looks as though it may rise to 3% in the US and possibly here in the UK and this is causing bonds to fall in value and stock markets to become jittery. Stagflation in other words.  No one can predict with accuracy the outcome of any of the above. Look how quickly the Trump bounce became a slump. It could just as easily change direction again.

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Stick with the businesses built to last and the managers who know how to navigate the storm.

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Commentary by James Scott-Hopkins

Founder, EXE Capital Management

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The views are those of the author only. The above does not constitute a recommendation to buy the fund and advice should be sought from your financial advisor as to the appropriateness of this fund in your portfolio. The value of investments can fall as well as rise. Past performance is no guarantee of future returns.

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