As in the biblical wedding feast in Cana in the Galilee, 2016 saved its best until last.
An alchemy of vitriol served up during the race for the White House, proved unpalatable to some 30 million Americans. To the rest appetising. For many the election result was a victory of truth over deception, a witness to the “amazing Grace” of God, the hand of Divine intervention, such was the magnitude of opposition that the victor had to overcome. To others, repulsed by Trump, it was a victory of deception over truth! Time will show us which is the case.
All but a handful in the media failed to watch the “signal” preferring to create and then believe their own “noise”. The election result, in this context, was a referendum on media bias. A few like the legendary statistician Nate Silver who suggested that Trump could win, were ridiculed and drowned out by media noise. For healthy debate and free speech, both those in the media and we the public must learn from this.
As we head into a New Year, negotiations for Brexit are being made difficult by millions of Brits who felt aggrieved, even disenfranchised, by the result of the 2016 referendum to leave the EU.
Will the “populist nationalist wave” that is moving across Europe and the US sweep France from membership of the EU? Should Marine Le Pen win, she will take France out of the EU. Bookies’ odds of 11/4 could prove misleading as in Brexit.
The financial markets have reacted favourably to the US election. The US Central Bank has raised interest rates, funds have poured into European financials from the US and bond yields have risen. The Euro weakening to parity with the USD becomes a possibility as a cloud of political and economic uncertainty hangs over Europe. However market history is replete with examples that political events have had little influence on market performance over the long haul.
“This time is different” to quote Sir John Templeton, are the four most expensive words in investment history. But could this time in Europe be different?
As investors look forward to 2017 perhaps Sir John’s warning may prove to be uncomfortably true. No one can, with any consistency, time the market or indeed knows anyone who can. Rather than try and beat the few professionals who achieve better then the market returns, investors would be better served, keeping costs to the minimum and accepting the market return. With some 80% of active managers failing to even match the market, accepting what the market gives will yield an above average return. Market risk cannot be eliminated; it must be managed. Watch the signal not the noise!
Jeremy Blatch TEP
This article was also published in both the online and print editions of the Sur in English