“The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown.”
The above quotation is from an essay on horror fiction, written by a chap rejoicing in the name of Howard Phillips Lovecraft. He died in 1937 aged only 46, yet is considered to be one of the most significant twentieth century authors of horror fiction, so he should know a thing or two about fear and its effects.
Fear is also the first emotion experienced in the Bible≠, so no matter from what angle one comes at it, there is something atavistic about fear, and it shows up in how we behave when we experience it.
The last week or so has been something of an object lesson in how emotions, especially fear, drive markets and currencies. With everything that was going on in the rapidly changing political landscape, the various indices were up and down like the proverbial yo-yo.
The thing is, none of it is real. Nothing has happened, nor is it going to happen for months yet. And even when it does, we won’t know the effect of it for months after that, maybe even years; therefore investors, whose activities are influencing market prices, are reacting to fears about the unknown. I would submit that, even when markets go up in reaction to positive news, it is because investors are buying for fear of missing out on something that might or might not happen.
When the Prime Minister’s Brexit deal was announced, and every time something happened that looked like it would improve the chances of the deal happening, sterling strengthened, and share prices stabilised. Conversely, with every ministerial resignation, every briefing against the deal, shares went down and the pound weakened against the dollar (and sometimes the euro, although the uncertainty hasn’t been great for the euro either).
My point is that, no matter what you think of the deal, or what business leaders, or the nation as a whole think about it, the very fact that there was a deal at all took some of the uncertainty out of the situation.
Whether it is good for the country or bad, or if it even happens, only time will tell. Business will figure out the best way to make Brexit work – the problem has been, and still is, until we know what we’re working with, nobody can formulate plans or make decisions, hence the ongoing market uncertainty.
But “this too shall pass”±, and the worst thing that any long-term investor could do right now is sell, and turn a temporary decline in value into a permanent loss.
President Roosevelt said, at a time of great financial uncertainty and worldwide political unrest, “The only thing we have to fear, is fear itself”.*
But don’t suffer in silence. If you have concerns or questions, please do contact one of the Navigator financial planning team, and we will be pleased to help.
±Attar of Nishapur
*F D Roosevelt, first inauguration speech 4th March 1933
Please note that past performance is not a guide to the future, investments can go down as well as up, and there is the possibility that you might get back less than you invested.