Equities are a long-term investment. Investment time horizons should be greater than five years; equity investors should always be prepared for volatility over short-term time horizons. Investors should aim to hold companies that are of high quality with strong market positions. We tend to hold few companies that are cyclically exposed. Historically, at times of significant market falls - for example, the dot.com collapse at the beginning of the millennium and the global financial crisis now over a decade ago, quality companies have tended to fare better than the rest of the stock market.
Investing in equities means ownership of portions of businesses. Our ethos is not one of a brief holding of a collection of tickers but of ownership of real businesses. While speculation may be successful from time to time, this does not play a role in our fundamental approach.
We are, of course, conscious of the short-term performance of our holdings. Paying too much attention to the scoreboard, however, is unhelpful, and we believe we are better served in focusing on our core competencies of stock analysis and selection. An understanding of the macro environment does provide us with an outlook for different sectors and geographies.
The yield curve has inverted in the US. Historically this has been one of a number of indicators of stock market peaks. A multitude of other factors continue to provide grounds for optimism, however: