The Markets are on Sale
Right now, investing isn’t very pleasant… well – at least not for those who’ve placed capital into global markets these last six months, yet we may find in just a matter of months, investing is again rewarding, especially if today marks the bottom of the market.
So - when is the best time to buy investment assets?
We all know the answer…
Warren Buffett is often quoted and said to be the modern world’s most successful investor. It’s a title he’s held through numerous economic cycles, over many decades. His own company “Berkshire Hathaway” was formed in 1965. One of my favourite phrases from Mr Buffett suggests; “Be brave (to invest) when everyone else is fearful”. It assumes you’ve done some homework first and that you invest sensibly.
Today, most sectors are reeling from the dramatic shifts in global economics, as interest rates respond to inflation sparked by a global pandemic. Accordingly, there are elevated risks; and yet into this hailstorm, Mr Buffett directed his investment company to invest US$51bn dollars.
Berkshire Hathaway still has US$106bn in Cash and Bonds, ammunition with which to add more into markets, should this moment prove not to be the bottom of prices. Indeed, it’s almost assured that today won’t be the last low point. Equally, it’s likely that when we look back in five years-time (or so), the returns we will see from our investments will be good ones (so much for the challenge of the last few months).
The intention of writing today is to offer some reassurance because, we know in these volatile times it’s very easy to become uncertain - to challenge our conviction for holding to the course. Volatility is not risk, but it can lead some investors to a poor decision and that is a risk. For those with the capacity, now is the time to be buying at low prices. We’ve no idea if today is the top or the bottom but, we know we are seeing a lot of quality managers and great businesses offered at 15-25% off last year’s prices…. they’re on sale!
For those of us with a long-term view, today’s uncertainty is a slow step forward (providing we don’t get stuck on yesterday’s news). Of course, it’s completely feasible that tomorrow may prove to be an even better entry point so, like Mr Buffett, it may pay to keep something in reserve for another time.
With so many headwinds, a lot of investors will miss the tailwinds that are also forming. For existing capital, no loss is permanent until it is realised and as we only seek to own quality businesses, they’ll manage through today’s uncertainty and be stronger.
A recession seems unlikely in 2022, though we’re sure one will materialise in time. (Recessions are the Winter before the Spring. They are a necessary season, though they’re not always pleasant and assuredly, we do all need to prepare for them). The “experts” suggest a recession may be on the cards for late 2023/24. We’ll see… there are many moving parts in the global economy.
Meanwhile, we'll stay the course and try to take advantage of the pricing offered by those now fearful.
Tony Munro | CFPCM, Post Grad Dip. Bus.Studies (PFP)
The views and opinions expressed in this article are intended to be of a general nature and do not constitute personalised advice for an individual client.