The dozen or so years that constitute my career as a fund manager to date have taken in almost as many business cycles as one might normally have expected to see in an entire career. It has been a great environment in which to learn but clearly there are some experiences you can only gain over longer periods of time.
In an effort to gain some perspective on different markets, therefore, I have been reading a history of the london stock market 1945-2007 by George Blakey. Initially over five-year periods and then by year, the book explores what was going on in the economy and the world and what was happening to key stocks and the market as a whole.
One interesting aspect of the chapter on 1945-50 concerns the general outlook of people in the immediate aftermath of the second world war and the striking contrast with attitudes today. Now, as we have noted in articles such as miner sees slowdown and China’s steel, both companies and investors appear to find it very hard to think outside of what is going on in the current world.
People talk about the eurozone crisis like it is the end of the world – as if the four horsemen of the apocalypse are saddling up and we should all be stocking up on tinned food and shotguns and hiding in caves until the all-clear is sounded. But, while we would not wish to play down the gravity of the crisis or its implications, this country has been in worse situations.
After the second world war, Britain was in an awful state. The country was in the middle of rationing and basically bankrupt, the unions held sway and, in the wake of a shock election victory by labour that saw Winston Churchill voted out as Prime Minister, everything was seen as up for nationalisation. Yet all of that was viewed as infinitely preferable to war and, over time, things started to work themselves out.
Currently, with all the negative news that is out there, most people only seem able to see the downside yet, despite an even worse environment after the Second world war, people were almost unreasonably optimistic. Today it may feel as if things will never get better, but the buoyant equity markets that followed an admittedly choppy five-year period after the Second world war, show that they do.