Stock markets around the world reached new highs several times in 2020 and have continued to perform strongly in 2021. How can this be explained in a time when we have had a global pandemic and an economy that was largely shut for significant periods of time. You may be puzzled, that’s understandable.
You may not be comfortable with current market valuations that have risen to nose-bleed heights. Me, too.
You may be concerned that markets are too dependent upon financial interventions from the world’s Central Banks. That’s a legitimate concern.
However, such concerns should not be used as reasons to try to time the market or to switch your investment to cash. One thing I can predict with almost total certainty; there will be periods of poor economic performance where we experience painful losses in the stock market, that is as inevitable as the rising sun. However, I do not know when this will happen and neither does anybody else. If you really could foresee the future, wouldn’t you be working at an investment bank or hedge fund making your fortune?
Because I believe that the global economy will continue to grow in the future and that the great companies of the world will continue to thrive and innovate, I remain invested in stocks and I will stay invested in stocks (hopefully until my dying day). I could be wrong, of course, but the bias favours growth. That is not much of a forecast, but it is the best I can do and it is certainly more accurate than the vast majority of the tired financial commentators we are subjected to on TV and radio.
It is also the simplest way I can find of explaining why I invest in the global stock market and why I recommend that, for long term investors, investing in the great companies of the world stacks the odds of getting decent returns in your favour.
Coman & Enda Brady