Crisis du jour

Generally speaking – ignoring the ongoing, interminable COVID-19 crisis, of course (which will come to an end one day soon) – it’s a pretty safe guess to say that your biggest worry today may not be the same as yesterday, or last week. Crises come and go, and thankfully so. When the ‘crisis du jour’ vanishes, to be replaced by the piece de resistance of tomorrow, we tend to breathe a sigh of relief and pat ourselves on the back for putting another nightmare behind us. Until the next one happens, of course, when we panic all over again.
It has been widely reported that the eventual ‘crash’ of the global stock market in March 2020 was caused by widespread panic among investors about the impact of the COVID-19 pandemic. This saw circa £100 billion moved from equities into cash (JP Morgan Guide to the Markets Dec 2020). People panicked and didn’t stick to their plans.
Periods of extreme turbulence – not just in the financial markets, but life generally – call for calm, clear thinking. It is important to remember that a crisis is not always a disaster or an emergency. A crisis is broader than an emergency (an urgent action) or disaster (a calamitous event). The Oxford English Dictionary defines a crisis as 1. A time of severe difficulty or danger 2. A time where an important or difficult decision must be made. Most formal definitions of a crisis include the words: turning point, crucial time, and decision.

Be prepared

When there is turbulence in the markets, the value of a good adviser really comes into play. In fact, Vanguard (the world’s second largest fund manager, with circa £5 trillion under management) asked me to write an article for them on the importance of behavioural coaching and how we deliver it to our clients. (Vanguard Advisor Stories, Nov 2018).
We not only prepare the plan, we rehearse the plan with you (as many times as it takes to get you comfortable with the reasons for sticking to the plan) and execute the plan (diversification of funds and, of vital importance, faithfully staying the course) by ensuring that you do not panic and make a snap decision at the wrong time.
At Blue Wealth, we don’t pretend that we can time the market, instead we encourage time ‘in’ the market. Had all those investors who panicked and withdrew their cash at the start of the pandemic last year stayed put and weathered the storm, they would have benefitted from the fact that from 1 April to 31 December 2020 the S&P 500 in fact returned a massive 47%!

Trust in humankind

Tied in with our fundamental belief in staying the financial course is our optimism that humanity will persevere, innovate, and triumph over the challenges presented to it, just as it always has. The world has improved and will continue to improve. After reading the following facts, the only rational reaction can be one of an optimistic variety:

  • The Natural Order: At one time, nature’s top predators were a threat to us. Now, we are very much a threat to THEM! (1)
  • Longevity – In the early 20th century the average global life expectancy was 31, today it is approximately 67 (2)
  • Technology – for example, the iPhone 12. Huge technological advances have meant that the camera in today’s iPhone 12 would have cost circa £400k to make in 1991. The whole phone costing £37 million! (3)
  • COVID-19 vaccine – According to the World Health Organisation (WHO), the average time to develop and make a vaccine publicly available until now has been 16 years (4). It took over 3,296 years for a smallpox vaccine to be developed (5). Although scientists didn’t have to make the COVID-19 vaccine from scratch (work had begun on making vaccines for SARS and MERS, which belong to the coronavirus family, during their outbreaks in 2003 and 2012) it is still pretty astounding to think that from dosing the first trial participants on May 5 it took only 6 months to get approval for emergency-use authorisation in the UK. (6)
  • The Future – I was invited to attend Abundance 360 last month. This was a 3 day global event hosted by Peter Diamandis (founder of the X Prize Foundation, and involved with Space X). Some of the discussions were truly mind-blowing – for example the advent of 6G – providing a connection capable of downloading over 140 hours of Netflix in a second and a demo of 3D printing of a 2,000 sqm house!

Our belief in this is mirrored in the way we will coach you, the planning and investments we encourage you to choose to help you achieve your most cherished goals.
It is far more rational and realistic to be an optimist than a pessimist, even though no one can predict what the future holds.

Three mantras for you:

This time it isn’t different.
This too shall pass.
Optimism is the only realism.

  1. “The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance” Burkhard C. Schipper, Department of Economics at the University of California, December 7th, 2005
  2. “Life Expectancy – Variation over time” Wikipedia
  4. Explained: How was Pfizer’s Covid-19 vaccine developed in record time? How does it compare with others?
  5. Indian Express, 9 December 2020
  6. Ten Global Trends – Bailey and Tupy, 2020

Raj Shah is founder of Blue Wealth capital and has been shortlisted for Financial Planner of the Year and Investment Adviser of the Year.