History In Motion

by Jeffery A. Keill CFP, CIM, FMA,FCSI

Everyone has heard the phrase ‘those who fail to learn from the past are bound to repeat it’..... Well, get ready to watch the next round of investors make the same mistakes as they always have, and will continue to do for eternity. The financial markets are one arena where history repeats itself, not only with much drama but also quite often, and yet people seem to forget past events just as quickly - short-sighted and blind to history. Buy low and sell high is a truism of successful investment strategies: whereas, buy high and sell low leads to investment failure. Everyone knows it, but seldom are they able to act logically. Well, failure is the result when we have people selling out of investments, forcing security price down. More sellers than Buyers causes this to happen. Simply supply and demand. Fear is a devil of a motivator when it comes to investor behaviour. These emotional responses to short-term events lead to horrendous outcomes, and the reason why Investment Return is greater than Investor Return.

Cleithrophobia?

Cleithrophobia is a fear of being trapped, like in an elevator, and not being able to get out safely. In general, most people do not fear elevators. Elevators are simply a shuttle service to take us up or down in a building, as expressed by the common phrase, “Going Up?”. Imagine if we simply changed the words to “Skyrocket and Crash”. I would guess that most people would opt to take the stairs. This is the sensational attitude of our media in whatever form you choose, as it reports the movement of financial markets. Exacerbating the facts into a fictional picture.

Trump tariffs are undoubtably causing some serious fear in the market. There is a real threat of recession as the world tries to understand the shift of global trade. Uncertainty, like seeing a shadow behind a bush, can cause investors to envision the worst outcomes. We are certain the shadow is a bear ready to attack us. To shred is to bits. In reality, it is just another rock or stump behind the bush, just like it always has been. We even laugh after the fact at how our silly minds led us to a worse conclusion. Again.

Captain Chaos and his consistent monologues about global trade imbalance will soon pass. Things will settle down by negotiation and some order will be back in place. Even though history has proven tariffs on their own can cause great problems (as they did under President Hoover), these events will lead to some new global trade order. Rest assured, there will be global trade. When this happens, markets will be back to their upward tracking of human advancements and achievements, and this will be another point of history repeating itself.

This is an opportunity for investors who can see it and are willing to take advantage of it. This is not a bear hiding in a bush. Those who take advantage of these events will find success. Those who allow short-term sensational events to determine their long-term success will suffer- rightfully so, as the world punishes those who do not learn from history. There is 200 years of economic and market evidence to support this truth, and I argue there is no evidence to support the opposite.

Once again - logic and patience must prevail over emotion and short-sightedness.