At some point, someone in the marketing department of most investment firms will venture the following: “Well, we had better send our clients something to read, otherwise they will think we haven’t done anything all week. Make it sound important and it’ll justify our fees.”
Weekly newsletters and market commentary are, in my opinion, a complete waste of your time as an investor. My issue with market commentary, particularly on weekly or monthly basis, is that it is largely meaningless if your intention is to gain some insight into what is about to happen in global markets and, more importantly, your portfolio.
I began to appreciate the futility of market commentary after reading ‘The Signal and The Noise’ by Nate Silver. Silver believes in the need for extensive data sets, preferably collected over long periods of time, from which one can then use statistical techniques to incrementally change probabilities up or down relative to prior data. In other words, analysing short periods of time, focused on a small island making its way in a global ocean of data and listening to bold, binary statements, will tell you next to nothing about markets, in any meaningful way.
As you make your way through the weekly waffle, you will often enjoy a commentary about the UK weather, the Royal family, with phrases such as “bellwether”, “headwinds”, or “dovish”. Just to pad the whole thing out. And if you make it to the end of the treatise, you will be rewarded with some pithy maxim about the importance of being well diversified and investing for the long term. But you knew that already.
My biggest issue with market commentary, particularly if it has a domestic focus, is that in a global, dynamic and incredibly complex world economy, what is happening in the UK is pretty much irrelevant. However important it might feel to us as UK investors, the machinations of Corbyn, performance of Marks & Spencer’s share price and the scrabble score for the word “prorogue” are utterly meaningless in terms of your portfolio performance and your future financial well-being. Most market commentary is simply two laminated sides of A4 text, interspersed with a few graphs to illustrate what has happened since the last newsletter.
If you would like an overview of the most relevant current events, I strongly recommend listening to Bloomberg radio or watching Bloomberg TV for 20 mins each day, ideally around 8am. They have a wide mix of individuals at the sharp end of commerce with something meaningful to say. You’ll hear from CEOs of airlines or car manufacturers, people at the heart of what is going on globally, talking about how current events are affecting their businesses. You will get a broad oversight of the relevant issues of the day and some interesting non-UK perspectives.
Finally, if you read the ‘Finance & Economics’ section of The Economist you will be as informed, if not more, than any of the learned soothsayers producing terabytes of “noise” each week.
Better still, “reverse engineer” your reason for investing in the first place. Work with a Financial Planner to establish your primary investment goal, such as “£5,000 per month of income from 55 onward.” Select an appropriate risk strategy, build in a margin of safety, i.e. use 5% returns when the expected rate of return is 7% for that level of risk and then just sit back and relax. Let capitalism and the most likely return for your given level of risk do it’s thing. Successful investing is as simple as that.
I will finish some wise words from John Kenneth Galbraith, “The only function of economic forecasting is to make astrology look respectable.”
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