One of our core convictions is that ‘it’s the fundamentals, stupid!’ We have written to you about this a number of times in the past five years when news has been uncertain and markets have been volatile.
We see little point in following news flows and reacting to short-term opinion, after all we invest in quality over the long-term. One of the biggest issues, however, is the incessant news flow that seems to require shorter and shorter news cycles. This creates uncertainty and, together with the dominance of technical trading, means investors can be affected as volatility increases across the board. Along with others, we have been surprised by how low volatility has been over the past several years, and we have been expecting it to increase as it has done recently. Volatility itself is not risk and does not create losses, making wrong decisions does.