Tell you what – shall we just not bother about 2012? After all, pretty much everybody in the wonderful world of investment seems in agreement that it is going to be a really depressing aff air.
Indeed, about the most upbeat comment I have seen suggests our best hope is things deteriorate so badly markets eventually pick up in anticipation of quantitative easing from the US Federal Reserve and even – in the process testing to breaking point the maxim of ‘better late than never’ – the European Central Bank. How perverse is that? But, then again, there is a diff erence between being contrary and being contrarian and surely you do not need me to remind you that when pretty much everybody in the wonderful world of investment seems in agreement on anything, it is at least time to raise an eyebrow. For an example, we need only cast our minds back to the start of 2011, when many commentators could fairly have been described as cautiously optimistic about the prospects for the coming 12 months. One oft-quoted economist picked from many was hardly out-of-step in his view that: “The year promises to be the third year of recuperation from the most severe global economic downturn since the Great Depression of the 1930s.” Nor would it be unrepresentative to quote another market pundit’s opinion 12 months ago that: “After a diffi cult and volatile past year for most equity markets, 2011 is potentially shaping up as a more ‘normal’ year as the global economy moves towards mid-cycle.” Normal? That so-called – and short-lived – “sweet spot” in the global macro-economic cycle made equities look quite attractive, particularly in emerging markets and particularly relative to those theoretically overvalued government bonds. And that was before we even got onto the US and how the S&P 500 had enjoyed a positive return in every – repeat, every – third year of a presidential election cycle since the Great Crash. I suppose I should be grateful I made my fi rst dedicated, modest investment in the US at the start of the only – repeat, only – third year of a presidential election cycle since the Great Crash where the S&P 500 ended up almost exactly where it started. After all, we need not rehash what happened over the next 12 months and what that in turn meant for equities, property and a fair amount of commodities. But the point – and, yes, I do have one – is that, as we head into 2012 to the accompaniment of almost universal wailing and gnashing of teeth among investment commentators, we should not forget that markets have the power to move in not one but two directions. This is not, believe me, to make any rash predictions about the coming year but merely to note that, just as good times do not mean markets will rise indefi nitely, bad times do not mean they will fall indefi nitely – or, as value investors more cleverly put it, it is dangerous to extrapolate the future from present circumstances. Perhaps we should give 2012 a chance after all.
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