Finance How we should think about financial change Before we get to that, it’s important that we give some thought to the nature of financial change. A lot of investors think of economics and investing in terms of “winning” or “losing” stocks; an economy that’s either going up or going down; certain geographic markets that have a bright future, while others are in decline; and so on. This kind of black-and-white thinking is neither fair nor accurate. It’s true to say that some economies, asset classes and companies are likely to face headwinds in the years to come; obviously, sailing your economic ship is more difficult when the wind is against you. But it will never be impossible. There will always be some savvy businesspeople who find ways to make money in the most difficult of circumstances. As an investor, your job is to seek out these savvy businesspeople and invest alongside them, no matter where they are. In the world of finance and economics, change is never totally negative or positive. Keep that in mind as you consider the following notes: not as a list of winners and losers, but as a catalogue of circumstances and situations that make your journey toward wealth a little harder, a little easier, or somewhere in between. Tailwinds: gold and precious metals Throughout history, financial uncertainty has generally been good for gold. When investors feel the need to preserve purchasing power, they have historically turned to the yellow metal. Today seems to be no exception. As political instability, financial uncertainty, currency volatility and stock market turmoil have taken over the headlines, gold has risen by a little less than 40% over the past year. Will such gains continue? Well, if trade wars, inflation and geopolitical tensions continue, it’s certainly plausible that the tailwinds for gold (and, to a lesser extent, other precious metals such as silver and platinum) will remain strong. If you haven’t yet, it might be a good time to open a small position in precious metals – either physical metal, shares in a gold trust or ETF or gold mining stocks as a hedge against further uncertainty. Headwinds: the “Magnificent Seven” Over the past few years, many analysts have noted how the so-called “Magnificent Seven” tech stocks (Amazon, Google, Netflix, Meta, Apple, Tesla, Nvidia) have been driving a large portion of the U.S. stock market’s impressive gains. As U.S. markets have dropped in the face of global trade tensions, these same high flyers have taken it on the chin: as of the first week of April (the very start of the tariff turmoil), the “Mag 7” have collectively lost more than US$1 trillion of market capitalization. Ouch. No doubt some of the drop is due to tariffs, political upheaval and recession fears. But it’s also likely that, after several years of outperformance, such stocks are simply coming back down to earth. Will they rebound sharply if the tariff turmoil is resolved and we manage to avoid a long, deep recession? Perhaps. But investors would do well to proceed with caution. Clearly, some of these high flyers are excellent businesses. But they’ll be facing some pretty stiff winds in their attempt to regain the lofty multiples which they once commanded, at least over the short term. 26 | www.snowbirds.org
RkJQdWJsaXNoZXIy MzMzNzMx