By Andrew Alexander, CIO and fund manager, GWA Asset Management and manager of the MGTS Qualis funds
In 2020, ‘doomscrolling’ was officially added to the dictionary after being heavily used during the lockdown. Six years later and we’re still doomscrolling with our newsfeeds filled with updates of war, climate change, economic weakness and all other types of doom and gloom.
It’s enough to get anyone down, and investors are no different. Faced with constant notifications many will be wary about committing money to the markets, with worries they could suffer heavy losses. Is the economy about to enter a serious downturn? Is World War III around the corner? Has climate change gone too far?
Unfortunately, I don’t have the answers. But what I do have is a level head. It’s very important to face these headlines with some perspective, especially when you’re considering an investment.
The headlines are understandably worrying, but markets rarely offer attractive entry points when the news feels comfortable. This comes down to the fundamentals of investment and where a lot of people trip up.
The word ‘risk’ has instant negative connotations, but every investor knows this is a fact of life and there needs to be an element of risk to help generate a potential return. A chart full of red lines and flashing numbers showing a market decline can be alarming, and volatility is often uncomfortable for investors, but opportunities can be presented here. Every market dip could theoretically help create better forward-looking opportunities for disciplined fund managers.
It can be easy to fixate on the bad news and this is what gets pushed most in the headlines and on our newsfeeds. After all, if it bleeds it leads! But there are several reasons not to be entirely gloomy that are sometimes overlooked.
For one thing, interest rate expectations have become more balanced. Outside of the US mega caps parts of the global market remain more reasonably valued, with Japan in particular continuing to offer structural reform potential. It’s also important to keep a wider mindset and remember that emerging markets are broader than China alone, with smaller companies potentially set to benefit if market leadership broadens
Doomscrollers will naturally worry about the future. The threat of worst case scenarios can add real negativity to uncertainty, but it’s crucial that investors don’t confuse this with the absence of opportunity. The best opportunities often appear when capital is crowded into yesterday’s winners and investors are reluctant to look elsewhere.
The headlines explain why investors are nervous but, fortunately, we don’t invest in headlines. Targeting the right valuations, with enough diversification, means we’re still engaged and looking for opportunities.
The good news is out there, you just need to look for it.
