Navigating Uncertainty

Returning from Edinburgh via the excellent East Coast Main Line train service to our Newark base, I am reflecting on some of today’s demanding but interesting debates with one of the industry’s most respected economists. The dark rain clouds outside seem reflective of his view of the world, but like the weather, nothing is certain, there are no guarantees. Over the Northumbrian coastline I can see a rainbow in the distance. The sharp contrast of colours reminds me of some of the other investment researchers we have spoken with today; each with their own shade of optimism. Investment markets remain challenging, but we return home feeling comfortable that our portfolios are sufficiently robust to manage the threat from the dark clouds, with some strategy within to take advantage when the sun shines.

The views of our economist were, in my view, credible, and I respect them. As with most academics, there was a sound theoretical base to his arguments, however in practice, often such views don’t play out as he might think. True, Donald Trump does appear to have a close to evens chance of winning the US Presidential race, and there is also a reasonable probability the European Union will disband and resurrect itself as something else over the course of the next 5 years. What strikes me is that his concerns surround political agendas and questionable leadership. In essence there is a lack of trust. Lack of trust tends to lead to fear and to more radical views. This was true of the Brexit debate and of the on-going US presidential contest. It was also prevalent in the recent Labour party elections.

What will become of Brexit when finally, we do exit? It’s too early to tell. The economist feels that the disentanglement of trade agreements between the UK and Europe will be the most complicated legislative programme since World War 2. I don’t doubt it, but what does that mean, and why will that be bad news economically? Does the man on the street even think about this stuff? I can see that my economist is deeply concerned, but I also worry that he’s reading too much into the detail. Of course, the early signs are that there are some significant changes afoot. It already costs us more to buy European and US goods. It costs less for those guys to buy our goods. Will that change anything fundamentally over the years ahead? Who knows how it will actually affect the economies of Europe and the UK?  There are logical conclusions to draw, but no one can say with certainty how the game will unfold. What we do know is that there are some good investment opportunities across the globe, as well as some that are significantly less attractive.

So we try not to look at the short term noise from egocentric groups of banner waving activists, who suggest that the world is destined for crazy things (that’s not our economists view by the way…)  Instead we focus on the right type of leadership when considering an investment opportunity. The best investment opportunities, in contrast to our political caricatures, are based around sound business models and great leadership. As always though, these must be available at the right price.

We believe that leadership sets the culture within an organisation. If the leadership is good, it will drive core values, ownership, responsibility, safety and is therefore better placed to create the sustainable growth required for longer term success. Good leadership is not easy. Leadership is a choice, not a position. With authority, you can make people do what you want them to do, but you cannot grow the qualities required to drive a team to work together to deliver outstanding results. There are many people at senior levels within both political and corporate organisations who are not good leaders. Just because a person has authority, it doesn’t make them a great leader. Our political leaders might do well to reflect on this as they try to steer the world to a better place. With that, it’s over to Trump and Clinton, apparently they are on the box tonight. Can’t wait.