Play it Again Sam

  • 09 Nov 2020
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Play it Again Sam

We delayed the October monthly report as we wanted to see the election result, which took a bit longer than expected.

When preparing this introduction on Sunday afternoon Biden looks to have won but expect recounts and challenges. The House and Presidency to the Democrats and still a likely, but not certain Republican Senate.

At Intralink, we have a clear investment philosophy, which is best understood through the MasterClass presentations on our website. Many of these are from deep thought, research and experience, real world education, rather than theory.

In the press there are constant predictions and experts suggesting their knowledge gives them some unique edge. They sound logical, have huge amounts of data and impressive qualifications, however when it comes to the future, the most generous way you could describe their ability is a best guess.

The trick with markets is you don’t have to just guess the future for the economy, different industries, individual assets, interest rates and policy, you must guess how investors will react and compete against everyone else’s guesses. You would think if you knew what was going to happen, the last bit of predicting the market moves would be easy.

“For two days heading into the election, Wall Street rallied on the assumption of a clear Biden victory and the possibility of a Blue Wave based on the polls.

The greatest fear up to that point was that it would not be a clear-cut result and it would be contested by Trump, leading to weeks and perhaps months of legal battles before a result could be called.”

No Blue Wave and it could not have been more contested! The Senate may not be concluded until January run-off elections. So, what happened, markets went up. Why? It appears investors were rejoicing a Republican Senate as it meant no rollback of tax cuts and unlikely to be significant increases in regulation and it would take the more adventurous economic policies off the table. So why did it rally in the lead up? Absurd.

We are active investors, but this is driven by valuation, not attempts to predict the future. We look to utilise the noise to enable us to buy at better prices and then focus on what we can influence. It is vital to be aware of the major risks, headwinds, or tailwinds, but you must sail the boat and adjust the course based on what comes. You do not try to predict the weather from the port and just set sail on auto pilot. You also want to make sure you are in the best built ship that will not get damaged or go down even in the roughest weather.

For further information or to discuss how we can help you, please speak to your adviser.