‘There is no sun without shadow, and it is essential to know the night’
Albert Camus
At any other time, a three percent bounce during May in the pan-European (including the U.K.) equity markets and the driest fifth month of the year in large swathes of the country since 1929, would represent an ideal entry into the summer months. However – despite recent lockdown liberalisations – these are far from normal times.
Extraordinary or unprecedented times are – by definition – not the norm. We all daydream about a return to our lives – of just a few short months ago – as global citizens where going for a coffee with family and friends, jumping on a plane or undertaking a bout of shopping on a crowded High Street was a relatively run of the mill event and not a restricted activity. We can all identify elements of our lives that will permanently change, with the distress and uncertainty this brings.
Kierkegaard once observed that ‘life can only be understood backwards; but it must be lived forwards’. In the narrow confines of the investment world, whilst the fictitious Hindsight Asset Management will always be an impossibly great performer, even a sharply changing and regime shifting world provides opportunities. We all know that the financial markets and all related investment routines around them are driven by a range of relevant drivers. Some of these are eminently quantifiable, dry and rooted in real world realities. Others draw on both the positive attributes and limiting flaws of human psychology. This is what makes the financial markets equally compelling and frustrating.
Let us examine the evidence as summer starts to fully blossom. Naturally a huge amount remains to be done. Healthcare concerns will remain uppermost in everyone’s minds until at least next spring, but the lack of a second wave so far is a positive, even as liberalisation routines mature. Certainly the progress of economies in Asia – such as China – provides some hope for western economies, which in April and May are likely to have been at the nadir of both their economic contraction and corporate earnings cycles.
Policy stimulus efforts by both central banks and governments remain material in both size and scope. Nothing is without a trade off, but such actions have provided some hope about the future – and hence why financial markets have looked through the gloom.
Looking ahead, policy emphasis should try to shift from big sweeping headlines around support packages and interest rates, to ensuring the right microeconomic incentives are there to liberate and inspire the job and wealth creators in the economy. As always, at times of a regime shift in many other ways, it is the detail that really matters. The countries – and economies – that can crack this challenge better than others are those that will ride out the rest of the 2020s better.
And financial markets over the summer? No doubt at times both compelling and frustrating but overall – assuming sensible multi-asset diversification – still rewarding in my opinion.
Sentiment has improved from a couple of months ago but outside some favoured areas, most investors are still climbing a wall of worry. Expect me to worry more when the feeling of huge challenges out there has passed. In the world of the financial markets it is always better to travel than arrive.
The information contained in this article is for general consideration only and any opinion or forecast reflects the judgment of the Research Department of Raymond James & Associates, Inc. as at the date of issue and is subject to change without notice. Past performance is not a reliable indicator of future results.
You should not take, or refrain from taking, action based on its content and no part of this article should be relied upon or construed as any form of advice or personal recommendation. The research and analysis in this article have been procured, and may have been acted upon, by Raymond James and connected companies for their own purposes, and the results are being made available to you on this understanding.
Neither Raymond James nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such research and analysis. If you are unsure or need clarity upon any of the information covered in this article, please contact your wealth manager.
Black MondayOn 19 October 1987, the stock markets experienced a dramatic plunge that prompted many firms to shut down their trading desks and turn off their phones to minimize internal losses. Raymond James refused to do the same. Our desks stayed open to help meet clients’ needs, resulting in our first and only unprofitable quarter since the firm went public in 1983. |
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Who was Raymond James?The Raymond in our name is actually from Edward Raymond, owner of a 15-employee mutual fund sales group, Raymond and Associates, along Florida’s west coast. He sold his company to Bob James on 15 July 1964, on condition that the surviving firm be called Raymond, James & Associates. Three days after the sale, Ed Raymond was involved in a near-fatal automobile accident and never joined the firm. Nonetheless, even after Raymond had passed away, Bob James insisted that his name remain on the door – ahead of James’ own. That was a promise he made to Ed Raymond three days before the accident, and Bob James was a man who kept his promises. |
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Bear Market of 1974The severe bear market of 1974 threatened the existence of Raymond James, which was bleeding capital by the day. Tom James, his father and other leaders took extreme measures to keep the firm afloat, slashing costs, foregoing paychecks and even attempting to sell the firm for just enough capital to protect client assets and retain as many associates as possible. The story could have ended very differently if not for a sharp upturn and continued rebound in the stock markets late in the year. |
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Taking Raymond James PublicWhen consideration was being given to taking Raymond James public, Tom James penned a letter to shareholders (largely employees at the time). ” … the public offering should be considered as a statement of our independence. While this is a psychological rather than an economic rationale, it is nonetheless very important. We have asserted for some time that we are not interested in becoming a small part of a very large corporation. That assertion results mainly from the inclinations of management rather than the economic benefits associated with either alternative. The public stock offering affords us the opportunity to enjoy a little bit of the best of both worlds. While shareholders will be given liquidity at fair market value, we will still have the ability to control our own destiny.” After 40+ years of Tom’s leadership, upon becoming CEO, Paul Reilly was often questioned about whether the company might ultimately surrender its cherished independence and be acquired by some larger entity. His response: “Not while I’m around.” It’s a theme that continues today. |
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