Worry?

We understand amidst the current tumultuous geopolitical climate, even the most seasoned investors can feel nervous and unsettled. 2024 is shaping out to be host to a highly polarised election landscape, sensationalised media and elevated uncertainty in the financial markets. No matter how sophisticated your analysis is, doubts will creep in when valuations and premises falter.

As investors, we seek to make actionable decisions. What is next course of action? Are our fears unfounded?

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Let’s take a look at some statistics.

Through the past decades, there were many reasons to be fearful. Highlighted in green above are the periods of economic recessions.

1. 1971 Nixon Shock
2. The Vietnam War, and the Cold War
3. Cuban Missile Crisis
4. 1973 Oil Embargo
5. Decade of Stagflation in the 70s
6. Volcker Shock
7. Dot Com Bubble
8. Great Financial Crisis, among others…

Each were hugely consequential to the United States in one way or another; yet decades later the market has never failed to rebound and forge new highs.

Some are worried about the macroeconomic consequences the polarised election cycle might bring. Yet, For the tenure when the Republican and Democrat parties ran Washington (13 years and 34 years respectively), meaning that one party had majority seating in House, Senate and Congress, the returns is for both parties is 14.52%. And in all election years (1928-2016), the average return of the S&P stands at 11.28%, with 19 of the 23 election years providing positive performances.

One might argue that the policies of each president are imperative for nurturing a favourable investment environment. But is there a President that has, or ever will be anti-markets?

The short answer is likely not. In fact, basing the market’s performance off a presidential administration’s decision and policy-making is reassuringly uncorrelated and inconsequential. As BlackRock aptly notes, elections do cause market valuations to be disconnected from fundamentals in the short term. By making decisions founded on market fundamentals rather than any view on the elections, BlackRock was able to exploit profitable opportunities in the repricing that occured after the 2016 US Presidential Election.

The political and geopolitical arenas are highly emotional and fraught with inherent biases. An attempt to analyse markets through a narrative-driven lens without critical assessment, inflated expectations (and even alluring conspiracies) is a recipe for disaster. In contrast, markets remain robust in these destabilising episodes. 

Focus on principles, convictions and guiding values through periods of uncertainty. The free markets do not reward fear but those who remain resilient, competitive and discerning. Life goes on amidst political uncertainty. It is how companies “put food on the table” that counts.

And this is the beauty of investing. At Palm Holdings, we earnestly seek resilient businesses that can weather through difficult times. We look ahead and assess corporations and firms’ abilities to stay discerning and seek profitable opportunities amidst the noise, seizing them.

Don’t get us wrong, we’re not saying you should always put blind faith that what has worked in the past will always translate to the present. Rather, channel the effort to develop convictions to actively seek opportunities in value/growth. Companies, not central banks nor governments, determine their own fate.

“Who dares nothing, need hope for nothing”

~ Friedrich Schiller