The Stock Markets
(updated 31 May 2024)
The key benchmark you should care about is achieving all of your financial and life goals, and not running out of money.
The Unimportant Numbers - 1 Month
Monthly figures are a distraction from your long term goals.
The Important Numbers - 30 Years
Investing in the Great Companies of the World has produced life-changing returns for the disciplined and patient investor over the last 30 years, the average length of a two-person retirement.
Source: FE Analytics, Humans Under Management. Returns are based on the total return of the respective indices, which assures all dividends are re-invested. Country returns are in local currencies, global returns in USD. Past performance may not be indicative of future results.
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Inflation - The Real Enemy (updated May 2024)
The number one enemy of the long-term investor is the financial dragon called inflation (the silent but steady increase of prices over time). An investment in the South African share market has consistently provided protection from this enemy. To earn this return, you had to be willing to see your investment value temporarily decline by about -15% on average every year without being panicked into selling.
Watch
10 ways to have a better conversation
Listen
The Best Financial Advice I Know (What I Want My Kids To Learn) [10 minutes].
A few things everyone should know about money.
A Constant Chain of Surprises
Experienced investors know that uncertainty is a constant companion. While the human mind craves certainty, there is, unfortunately, none to be found in investment markets. Yes, history being our guide, we believe that the stock market (companies and businesses we use daily) will reward patient investors who remain disciplined, but there are no guarantees (or facts) about the future. Uncertainty, however, comes in different flavours. As a former US Secretary of Defense once said, there are known unknowns (the things we know we do not know) and unknown unknowns (the things we don’t know we don’t know). It’s the former category, the known unknowns, that investors tend to concern themselves with. In June 2024, concerns about inflation are starting to ease, the various election uncertainties will soon pass, and the ongoing wars are slowly moving off the front pages as readers become sanitised to the ongoing tolls. How each of these topics will end is unknown, but the element of surprise has undoubtedly passed. They are known unknowns. With many previous surprises wearing old, believing that certainty is around the corner is tempting. However, as financial author Morgan Housel states, “History is a constant chain of surprises.”
Unknown Unknowns
While known unknowns get all the attention, it’s the unknown unknown that causes investors the most trouble. “Surprise is the mother of all panic”, said Nick Murray, and panic is an emotion that leads to poor financial decisions.
History is full of these surprises…
Latin American countries, having borrowed eagerly throughout the 1970s, faced the music in the 1980s. When Mexico defaulted in 1982, it echoed like a gunshot. As domino after domino fell, the world noted a sobering truth: debt-fueled growth carried a heavy price. The market opened abruptly on October 19, 1987. Without warning, the Dow Jones plunged by 22%. Traders were blindsided, staring at screens flashing red (doom). The culprit? Program trading machines executing trades at lightning speed, transforming a ripple of panic into a tidal wave. In the 1990s, the internet ignited a frenzy. Stocks soared, fueled by dreams of online gold. By March 2000, reality hit hard. The crash was a harsh reminder: innovation couldn’t replace sound financial fundamentals. The NASDAQ index plummeted nearly 80% over two years. Startups vanished, and investors faced massive losses. In the early 2000s, banks handed out mortgages like candy, assuming housing prices would eternally rise. By 2007, cracks appeared. In September 2008, the collapse of Lehman Brothers sent shockwaves across the globe. Financial markets seized up, and economies plummeted.
Finally, an invisible enemy brought the world to its knees. In 2020, the COVID-19 pandemic shut down economies overnight. Markets plunged, unemployment soared, and global supply chains fractured.
Prepare, Don’t Predict
By definition, we cannot predict the next global or financial surprise. Based on the track record of serial forecasters, it’s not worth searching for the answers in the media, either. As investors, it’s prudent to assume that we will frequently be surprised by the course of events. How can we prepare for something that we cannot predict? While we do not know what will bring the next round of panic, we can reliably predict some of the consequences. As with previous surprises, market volatility, sharp interest rate increases/decreases, and inflation could all rear their heads. However, like the ship crew that practices lifeboat drills while docked in harbour, we, too, can assess our preparedness before the storm arrives. Stress-testing our financial plans for their ability to provide long-term returns but also survive frequent temporary declines, having a cash buffer for emergencies, and investing enough so that even future personal surprises won’t jeopardise our independence are all sensible ways to plan. The importance of a margin of safety in our financial plans cannot be stressed enough.
Lastly, while the next surprise may shift your focus to short-term survival when it arrives, we encourage you to build your plan around the likely long-term trajectory of financial markets. When it comes, the next storm will pass like the others before it.
Read
The Benefits of Exploration [6 minutes].
Five ways to explore more so you can live better right now.
How Much is a Memory Worth? [5 minutes]. How to make retirement less scary
A fascinating exploration of the value and [5 minutes]. The value of a mission significance of memories. statement and the significance of
relationships. Read the full article Read the full article
‘Money pervades everything’: the psychotherapist delving into our deep anxiety about finances [10 minutes].
Our fears, desires, and past experiences shape our relationship with money.
Why We Should Talk About Money More Often [4 minutes].
We don’t have to figure everything out on
our own.
The fresh start mindset [4 minutes].
How to navigate life transitions and find harmony.
The Rediscovery of Human Progress
The modern world is built on centuries of progress, yet many take its comforts and opportunities for granted. A new movement aims to redefine our understanding of advancement, and focuses on celebrating humanity’s achievements to shape an optimistic narrative for the future.
OpenAI releases GPT-4o, a faster model that’s free
OpenAI is launching GPT-4o, an iteration of the GPT-4 model that powers its hallmark product, ChatGPT. The updated model “is much faster” and improves “capabilities across text, vision, and audio,” OpenAI CTO Mira Murati said in a livestream announcement on Monday. It’ll be free for all users.
Spanish doctors perform first robotic heart surgery on teenagers
Medics at two hospitals in Barcelona operated on two teenagers with congenital heart disorders for the first time with modernised robotic techniques. For the first time in Spain, robotics has been used in heart surgery on children and teenagers.
Visuals
The Growth of a $1,000 Equity Investment,
by Stock Market
In this graphic, we show the change in value of a $1,000 investment in various leading equity indexes from around the world. This data was sourced from Investing.com, and covers a five-year period from April 2019 to April 2024.
Life Expectancy by Region (1950-2050F)
Average life expectancy at birth is projected to surpass 80 years in most global regions by 2050, according to the UN World Population Prospects 2022. This infographic illustrates the trajectory of life expectancy at birth for both sexes.
Over time, the distribution of global GDP among the world’s largest economies has shifted dynamically, reflecting changes in economic policies, technological advancements, and demographic trends. To see how this has played out in recent decades, we visualized the world’s top six economies by their share of global GDP from 1980 to 2024. All figures were sourced from the IMF’s World Economic Outlook (April 2024 edition) and are based on using current prices. Starting with the U.S., we can see that America’s share of global GDP has fluctuated quite significantly over time. After bottoming out at 21.1% in 2011, the U.S. economy grew its relative size by several percentage points, and is estimated by the IMF to make up 26.3% of global GDP in 2024.
We hope that you enjoyed this month’s newsletter. Please let us know what you enjoyed or write back with any of your own news. Please forward to a friend, relative, or colleague. As always, we’re here for you. See you next month.
Created By Humans Under Management On Behalf Of Bespoke Financial Ser vices
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