Stairs in the Dark (Jamie Hyndman)

by Jamie Hyndman, Mawer Investment Management

Every morning I come down my stairs at home in the dark. I do this because my kids like to leave their doors open at night and I don’t want to turn on a light and wake them. When I walk down these stairs, it’s always with a bit of trepidation because it’s pitch black, I’m groggy, and who knows what toys the kids might have left strewn about the night before. To ensure a safe arrival at the bottom, my system is very simple, but effective – I go very slow, walk gingerly, and hold onto both banisters.

As I was walking down the stairs this morning, I had the thought that this experience is much like being an investor in today’s markets. It’s kind of scary, and there are often obstacles in the way that have unknown consequences. These days it’s government debt, trouble in the Middle East, and uncertainty in Emerging Markets, amongst other things.

But are these really new issues? Haven’t we seen much of this before in some way, shape or form? We’ve seen governments restructure their debt, we’ve seen eras with debt deflation risk, we’ve seen Emerging Markets volatility, and to be honest, turmoil in the Middle East is actually more the norm than the exception. So, despite there being some unique circumstances each time, it kind of feels like déjà vu.  Like Mark Twain said, “history doesn’t repeat, but it sure does rhyme.”

So, as we look forward to 2013, we can’t say for sure what it will bring. But it is worth noting that mankind is adaptive if nothing else. We are likely to find a way forward, as we always have. The nuances this time around, such as the enormous central bank intervention in the economy, may prove to be challenging but we believe we’ll be in a better place eventually. Economies will be reformed, government deficits and debts will come down, and global economic expansion will continue.

Unfortunately, we don’t know if this will be sooner or later. To deal with this uncertainty we will continue to employ our tried and true investment approach – we will build resilient portfolios that are well diversified and hold quality investments for the long-term.

We will continue to walk down those stairs in the dark because we believe we can succeed in doing so, and in turn help our clients achieve their investment goals.

On behalf of Mawer Investment Management, Happy New Year!

Jamie Hyndman