This Brexit business seems to have been going on for ever. Whatever constitutes normal everyday life has seemingly been put on hold while UK and EU politicians thrash out an increasingly elusive compromise solution.
Whether such a solution exists, only time will tell. I had to smile recently when a Sky reporter asked one of the political cognoscenti what he considered the likely outcome would be – only to be met by the rejoinder that he didn`t have a clue, and anyone who professed to know was a liar.
So, we wait impatiently for clarity and certainty before committing hard-earned savings into volatile stock markets. Politicians who believe “businesses need certainty” conveniently ignore the fact that companies trade for most of the time in an unpredictable environment in which change must be regularly confronted and managed.
Likewise, many investors eagerly anticipate the day when a perfect combination of forces will finally signal that it`s time to enter stock markets. However, there’s an old Wall Street saying that goes: “The market will always act in such a way as to frustrate the greatest number of investors.” Just when you think it’s going to zig, it zags.
From a UK perspective, it would be easy to believe this never-ending Brexit tussle was the only story in town. The reality is that, away from Europe, the rest of the world probably views all this as a bit of local difficulty. Whilst the May/Barnier/Tusk/Juncker soap opera has been playing out, there has been a significant global market bounce-back from the downturn seen at the end of 2018.
Anyone waiting for that perfect moment to jump (and there have been many) would do well to remember the well-worn adage: “It`s time in the market, not timing the market”.
By way of example, 7IM recently calculated the loss of return if you had missed the best 5, 10, 20 or 40 days` returns from the FTSE 100 & the S&P 500 over the last 20 years. Looking at the FTSE 100, fully invested (and ignoring costs) £10,000 would have grown to £33,000. Had you been out of the market for the best 20 days your return would have been only equivalent to your original investment and, missing out on the best 40 days, you would have lost half of your money.
Who is going to tell me when these best 20/40 days will emerge over the course of the next 20 years?
Now, this isn`t to say that you should throw caution to the wind and fully commit to stock markets without delay. There is nonetheless an argument for phasing in investments over the next 12 to 36 months, rather than await those perfect conditions that may be eternally elusive.