Value matters: Steering a course through uncertain markets

History suggests that good stockpicking results can make an enormous difference when equity markets are generally weak. However, savvy investors can take what we learnt from previous episodes in history and apply it to the world today. As John Christy from our offshore partner, Orbis, says: the one lesson everyone forgets during a market bubble is that valuation always matters.

We often say that investment returns — both absolute and relative — do not come in a straight line. The unwinding of the “Everything Bubble” is proving to be an excellent real-time case study. The bubble has started to burst, but as we noted in last month’s commentary, we are a long way from completing the post-bubble deflation process that has been typical historically.

Markets are also reflexive, which is to say that there are powerful self-reinforcing dynamics. The upward spirals that come with FOMO (the fear of missing out) need little explanation after the insanity of 2021, but there can also be downward spirals.

Full article:  https://www.allangray.co.za/latest-insights/offshore-investing/value-matters-steering-a-course-through-uncertain-markets/

March 16 2023 By John Christy - Allan Gray