Overall, our outlook on equity markets around the world – from the US, Europe, and even emerging markets – is pretty positive on a two-year, even a three-year view. The issue is that in the near term there’s a lot of ‘sausage making’ and noise that could distract us and cause some volatility.
We think we are entering a ‘soft patch’ for the US economy that could lead to the market trading even lower, before this correction that we are in right now ends. You can see it from a lot of fronts businesses around the US, hesitating to deploy capital partly because they don’t know what the rules of the road are. Government workers are suddenly frozen and it’s affecting consumer behaviour in the US more broadly – with job cuts on the government side and the tariff space creating a lot of chaos here and abroad in terms of how companies should deploy capital, and so on. All those things I think are causing a bit of a soft patch right now in the US economy and the US stock market, and we think that will create an opportunity to redeploy additional cash into the markets.
I’ve been using this metaphor of Ulysses with our investor base. Famously, Ulysses is the only sailor who ever managed to succeed in sailing through the Straits of the Sirens and hear their beautiful singing without crashing. The way he did this was by filling his sailor’s ears with wax so that they wouldn’t hear the siren calls that would lead them to the rocks, and then he had himself strapped to the mast so that he couldn’t direct the ship in that direction but kept his ears open so he could hear the beautiful singing. I think for our investor base that’s what we’re trying to do here – I am saying “stay strapped to the mast”. The long-term outlook actually looks even better perhaps under the supply-side reforms coming out of the Trump administration, but the noise in the near term, the ‘sausage making’ process on all of these fronts, we’re already seeing this come to the fore and the markets could overreact. But I think that creates an opportunity, not a real risk, for the long-term investor.
