Nobody has that magic crystal ball, so we have to use the information available to us at a given point in time to make an assessment of how the year might play out. Historically this has been difficult, but in these very uncertain times, we can honestly say that looking into the future has rarely been as unclear and unpredictable as it is today.
As discussed in previous articles, there were many surprises in 2016 and we expect the same in 2017. In fact, the best advice we can give is to expect the unexpected. The new US administration under the leadership of Donald Trump brings the potential for changes to policies that will impact investors around the globe. And even though some of these changes may benefit investors, the uncertainty will create volatility. The best possible approach in times of uncertainty is to maintain a well diversified portfolio of assets across each of the major asset classes, a tactic we have been advocating for many years.
If that’s the best advice we can give you for 2017, the second best piece of advice is “Resist the urge to act.” Generally in times of excessive levels of volatility we are motivated to do something, but we’re often not sure what that something is. Those urges are often fueled by one of two emotions, Fear & Greed, but the problem is we can often be driven by the wrong emotion at the wrong time.
There’s a quote we often refer to from Warren Buffett – “Be fearful when others are greedy, and greedy when others are fearful.” In other words, don’t be a lemming and follow everyone else as they run for the exit selling everything they have and putting it in a Jam Jar under their mattress. Volatility will create opportunity and we will look to take advantage of that wherever possible.