Investors and pundits alike often attempt to compare a given point in time (usually the current one) to some historical period to help formulate a strategy or narrative to guide their decision making and commentary. Such behavior makes perfect sense given the human mind’s need for certainty. As homo-sapiens, we generally have a very hard time navigating uncertainty.
So as we look at the world today and in the spirit of uncertainty, here are some of the conditions we all face whether we run a business, work for a business, run a country, are citizens of a country, manage money or hold an investment portfolio:
- The bottom, or near the bottom, of a long-term interest rate/debt cycle;
- Elevated valuation levels across nearly all asset classes;
- Likely the end of a historical monetary easing cycle;
- Fiscal stimulus in what appears to be the back half of one of the longest economic expansions in the history of the US;
- Apparent increasing popularity of populism/nationalism globally (maybe protectionism too?);
- The increasing disruptive nature of technology on businesses and our individual lives;
- The graying of the developed world as a result of demographics and longer lifespans.
The US and the world have certainly experienced some of the aforementioned conditions previously but they haven’t all been present simultaneously at another point in history that I’m aware of. So for now, looking to history for clues about how things will unfold from here feels like it might be quite a bit more challenging than usual. We can discuss the implications of each condition with some degree of confidence (i.e., elevated asset valuations will probably result in lower future returns), but as a whole it’s anybody’s guess as to what the ultimate implications will be. The future is sure to be exciting but as always it’s highly uncertain.
