Short-term versus long-term analysis

There have been a few themes discussed on these pages that might seem a bit repetitive, or even wrongheaded to some, so it’s nice to see when others in the investing world are saying some of the same things.

Specifically, Tom Bradley, president of Steadyhand Investment Funds, writes in the Financial Post about the need to minimize some of the hype surrounding things like U.S. President Donald Trump, and even Brexit. According to Bradley, they will have minimal impact on long-term investing, and the political shock they have brought to the world of investing should have already been discounted by now.

Avoid hyperventilating

Indeed, this is something discussed on these pages for some time now. People have hyperventilated about Trump ever since he announced his presidential run, and certainly since he won the presidency. This is not in any way an endorsement of Trump, but a reminder that the world, including the world of investing, is much bigger than he is, or any other president.

Instead, Bradley talks about two long-term factors that investors should start taking more seriously instead of watching too much cable news. The first is debt — and he’s talking about all debt; that being accumulated by households and governments. It’s growing, and getting out of hand.

Sustainable trends

The second long-term factor is the growing middle class — around the world. This is something that has been happening in China in recent decades, and is now also occurring in places such as India and other regions of Asia in particular.

What’s fascinating about Bradley’s analysis is that he says both factors — debt and the middle class — have contributed to world economic growth in recent years. However, he says the first, debt, is not sustainable, and there will be a reckoning, sooner or later. You can only keep borrowing money for so long. But, the second factor, the growing middle class, should serve as a counter-balance, since it will continue to happen for the foreseeable future.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


A truly long-term outlook

There is never a shortage of short-term economic an investment prognostication to be found in the popular media. In case you haven’t heard, there’s eventually going to be a recession, never mind that recessions happen from time to time.

Of course, we’ve talked about such short-term prognostications here on these pages. If you went just by what you here in the popular media, including in the financial pages, you’d think we not only would have hit a recession by now, but maybe even a depression. That’s how bad things seem to get, if you look at the short-term.

Not day-to-day, or even a year

That’s why smart investors don’t just look at the short-term and, in fact, successful investors have to look at the bigger picture, too. However, even here, much of the popular media has a focus on yearly outlooks. If you were to do a Google search right now, almost all the investment and economic outlooks are for the year 2019.

But, as a forward-looking investor, you have to look even beyond 2019. What about 2020 and beyond? If you’re going to meet your investment objectives, you have to see that far ahead and then some.

So, if you start looking that far, you get to find information that others aren’t looking at. For example, Scotiabank provides a long-term economic outlook for the Canadian and U.S. economies, and it covers the period from 2018 to 2023. Its findings shed an interesting light on what the future might hold, always keeping in mind, of course, that the future is never certain. Good investors always know that.

The next few years

Specifically, the Scotiabank report states that, although short-term economic growth in North America should be higher than potential, the long-term outlook should see things coming back into equilibrium. This indeed confirms what we’ve been saying on these pages all along; that short-term fluctuations usually get evened out over the long-term, don’t they.

In addition, the report states that the short-term uncertainty surrounding NAFTA negotiations would have no lasting effects. The report was actually written before NAFTA was successfully renegotiated, but it was prescient, wasn’t it. It actually stated that the negotiations would be successful, and it was right.

Where else have we been hearing that the world wasn’t going to end because of short-term trade negotiations? Right here, and that’s because a focus spanning years should be what investors adopt instead of a week-to-week habit of panic attacks from reading sensationalized headlines.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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