In an early stab at understatement, it’s been an interesting start to the year, hasn’t it? Mr “the-stock-market-loves-me” Trump seems to be adopting a rather different course of late, with trade tariffs being thrown around like confetti. This has naturally had an impact on global stock markets, with volatility making its noisy return.

I don’t mean to be flippant here. I know the numbers are worrying for some, and I’ve addressed that in the main piece below. Right now, our role as successful investors is to remain calm. Ignore the noise (as much as possible) and remember that staying in your seat just now is the price of the long-term returns that we enjoy.

This too shall pass.

Whether we like it or not, volatility is a natural part of investing. Declines can and do occur frequently. This one may feel different because it is short and sharp, but it is not different. Global investors have been through tougher times than this.

Ongoing clients of the firm are welcome to call me directly with questions, or even just to chat things through. Anytime.

We’ll take a look at the usual numbers shortly.

But other than that, we’ll get a bit techy – analysis, not actual tech. My life isn’t that cool – responding to a financial journalist that really should know better, with the usual ramblings toward the end.

Enjoy!

Monthly Market Visuals

The Return to Normal

After two remarkable years in the financial markets, February and March brought a return to a more familiar pattern.

The US market (which drives global sentiment) declined by approximately 10% in four weeks, driven primarily by the uncertainty surrounding Donald Trump's proposed trade tariffs and concerns about their potential impact on corporate earnings.

Naturally, news headlines turned dramatic, market commentary took a decidedly negative tone, and some investors felt uneasy.

But here's the reality check we all needed: After two years of very little volatility, this is the market behaving precisely as we should expect it to.

The Reality of Market Rhythms

The relatively smooth sailing of 2023 and 2024 was the exception, not the rule. The financial markets have historically moved in a pattern that includes regular periods of decline interspersed with longer periods of growth.

Since the turn of the century, the average annual market decline has been approximately 16%. So, while the recent decline happened very quickly, what we're experiencing now is milder than what history suggests we should expect in a typical year.

The real outlier wasn't this decline; it was the previous two years of extraordinary returns with minimal volatility. While those returns were certainly welcome, they may have created an unrealistic expectation of normal market behaviour.

The Innovation Response

One concern driving the current decline is uncertainty about how new tariffs might affect corporate earnings. It's worth remembering that throughout history, companies have consistently demonstrated remarkable adaptability.

In the short term, yes, earnings reports may reflect some turbulence. But in the long run, the great companies of the world that make up your portfolio have a proven track record of innovating their way around new challenges. They adjust supply chains, develop new markets, improve efficiencies, and find ways to continue growing despite obstacles.

This adaptability is precisely why equity investments have outperformed other asset classes over time: not because they're immune to challenges but because they repeatedly overcome them.

Discipline: The True Wealth Builder

The path to financial success isn't paved with perfect market timing or selecting next year's winning stocks. It's built through consistent, disciplined behaviour during periods precisely like this one.

Lifetime investment success comes from continuously following your financial plan. Likewise, substandard returns and even lifetime investment failure come from reacting to current events. This principle is being tested now, and it is the perfect opportunity to demonstrate its truth.

Every market decline throughout history has eventually reversed, and successful investors understand that these temporary downturns are simply the “price of admission” for the long-term growth that often follows.

For those still in the saving stage (when you’re investing every month), the current period represents genuine opportunities. Each contribution you make during down markets purchases more units of the great companies of the world at discounted prices.

This Too Shall Pass

The financial media thrives on creating anxiety about short-term market movements. Their business model depends on keeping you glued to headlines and market updates. However, successful investors understand that daily market news is merely noise that distracts from the signal of long-term growth.

Our advice remains unchanged: ignore the short-term noise. Focus instead on the aspects of your financial life that you can control: your savings rate, your spending habits, and most importantly, your behaviour during market declines. If there's been no change to your circumstances and goals, your financial plan should not change. If there's been no change to your financial plan, your portfolio should not change.

While we do not know what positive or negative news awaits us in the coming weeks, we urge you to stay patient, remain disciplined, and continue behaving your way to wealth.

Our Work is Never Done

Paul Lewis is a financial journalist and a good writer. He’s recently penned a piece regarding his own personal savings and why he will only ever invest in cash.

Now, first things first. Kudos to Mr Lewis for doggedly sticking to his position through thick and thin – he’s been espousing this belief since 2016, at least. I almost have an admiration for such tenacity, such steadfast commitment to one’s cause despite the mountain of contrary evidence.

Not dissimilar to my view that I am a capable golfer; evidence be damned.

And, would you believe it, such articles tend to appear just as the stock market is, well, doing what it’s doing right now. It attracts attention, comments from people like me who are trying to shield clients from financial suicide.

And like a naïve fish bounding towards the breadcrumbs, I have of course taken the bait. Well done again Mr Lewis.

Now, let’s actually digest the content. Let’s consider – with an open mind – such an approach. The basic mantra of Lewis’ article is that we should never invest in shares and instead hold only cash. This is because the stock market – God forbid – goes down as well as up, whereas cash does not. Right…. There’s the first flag.

It’s almost tedious to write this, but of course shares go down. Sometimes sharply, sometimes often, and often without reason. Shares prices are driven by human behaviour as much as financial fundamentals, and the human mind has some glaring cognitive biases where money is concerned.

It could be argued that Lewis has a tinge of ‘confirmation bias’ throughout the article. His referenced graph (see below) which shows shares vastly outperforming cash is of course ‘biased’ and not fit for purpose.

*Source: Natwest*
Presumably the below is also flawed in some form:

The blue line is a specific global equity fund – I had to select one to generate the chart – but to be as fair as possible to Mr Lewis we will work from the lower performing red index.

Essentially, what I have done with the above – going back 10 years – is assumed that for all of those 10 years you were able to secure 2% more than the Bank of England base rate (without exception) and plotted that against a global share index and the all-important UK inflation rate.

A few quick observations. 2% above the BoE base rate would equal 6.5% today. That ain’t happening folks, unless you are some sort of loan shark and certainly not with any reputable bank.

But for academic interest, let’s assume you could get such a return and your money was safe.

Bad news – it still trails inflation. And that’s just RPI, which in my view no way reflects people’s reality. You have only to look to your council tax increases – 10% in Edinburgh, the same in Midlothian, and a whopping 15.6% in Falkirk – to get a better reflection of how much costs are truly going up by, albeit that is only one indicator.

The stock market returns speak for themselves. I don’t need to add anything here.

For a tougher test of the theory, I have pulled the start date back to 1st Jan 2008, the year the global financial crash started. The global stock index saw a 37% decline during this period, but unfortunately for Mr Lewis, the numbers still don’t work:

It’s not even a contest.

There will absolutely be periods – short ones generally – where cash outperforms shares. But for true financial salvation, the numbers do not lie.

The above does not take account of the wonderful effect of pound-cost averaging for the investors that are contributing regularly, as touched upon earlier. Cash savings do not benefit from this feature.

I was going to digest the full article, but I think the main theory has been addressed. You can make your own mind up.

You Look New Here

A warm welcome (and well done if you’ve made it this far) to the new subscribers of this monthly scribble.

On that, I quite like the earlier analytical stuff. If anyone has any suggestions, articles they have found interesting, or just feedback in general, you know where to find me.

And finally, if you know of anyone else who may find this sort of thing interesting – I know, bear with me – please do inflict/send it on to them.

Optimism Prism

Your monthly dose of the good stuff:

Vast Undersea Tunnel Will Change the Road and Rail Map of Europe
Groundbreaking Map Made of Human Brain Mitochondria
Acts of Kindness 10 Percent Higher than Before 2020
Recommendations

Edinburgh is apparently amongst the most walkable cities on the planet. So, your recommendation this is month is, err, Edinburgh. Where a lot of you already live. Congratulations.
Replit AI App Builder – I thought this was quite cool, and maybe an indication of where we are going in the future.
My good friend Suzi has recently started up her own business with Travel Counsellors. If you’re in the market, I know she’ll take superb care of you.
That’s us for this month.
All the best,
Andy

The compliance bit:

• This newsletter is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

• Past performance is used as a guide only; it is no guarantee of future performance.

• Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

• The value of investments and any income from them can fall as well as rise. You may not get back the full amount invested.