Markets

Green Fisher: “Confidence in the early bull market”

The pessimism of disbelief prevails in early bull market phases. The previous bear market is still present in the minds of investors, which is absolutely true in the case of the Corona crisis.

Every beginning is difficult

The pessimism of disbelief prevails in early bull market phases. The previous bear market is still present in the minds of investors, which is also absolutely true in the case of the Corona crisis. The much-cited second wave gives rise to major concerns that the newly started upward trend can really develop sustainably and substantially. The majority of investors concentrate on possible negative scenarios, while positive influencing factors tend to be belittled. Stock markets look to the future, and admittedly, it is not always easy to reconcile your own beliefs with this perspective.

There is a lack of confidence

It takes a healthy dose of trust in the global economy to believe in a better world after the fastest bear market in history – with or without Corona. It takes confidence in the ability of the economy to change and adapt to be able to deal with serious problems. A characteristic that the global markets have proven time and again in their long history. Only: Where should this trust come from in this phase?

Bad image

The stock culture in Germany has always been stunted, and the headlines keep saying that not much is changing about that. Because stock markets don’t make headlines with the fact that they make long-term superior returns possible, the limelight belongs to the scandals. VW gets entangled in the emissions scandal, Wirecard sinks itself through an unimaginable balance sheet fraud, Grenke is facing massive allegations, the US company Nikola is in the sights of the American stock exchange regulator and Deutsche Bank has been a regular guest in large-scale financial scandals for many years. In the face of these machinations, how can one gain confidence in listed companies? With a rational approach to equity investing!

Not too complicated

One of the many pieces of advice from Warren Buffett is: “I only buy what I understand.” On the other hand, one could argue that this view is “old-fashioned” and that future-oriented technologies, whose business models are not fully understood by every market participant, are the greatest Offering growth opportunities in the market – artificial intelligence, the Internet of Things and much more. As is so often the case, the truth lies in the healthy middle. On the one hand, as an investor, you should make sure that you do not close yourself off to future issues, on the other hand, portfolio construction should not mean the “search for the next big thing”. Anyone who can flexibly base their investment style on developments in the market cycle and review the business models of individual companies as rationally as possible puts them in a promising position. And who will protect investors from the black sheep? Ultimately, nobody, which is why rational portfolio construction also includes healthy diversification.

Conclusion

Stock markets offer long-term promising investments because the fundamental trend towards global growth is an unstoppable force. However, trust in this robustness is required, especially in the early bull market phase. Unfortunately, typical headlines do not help build this trust – it is therefore up to rational investors to be there at this early stage.

You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.

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