The power of capital markets

The power of capital markets

The market is one of the best forward-looking machines we have at our disposal. Investors around the world are constantly incorporating new information into prices, based on their perception of how that - and all other - information affects a company's prospects, and thus its stock price. The game of skilfully outguessing the market is proven to be one which few - if any - can consistently do so successfully, As such, we prefer to own the entire market, at least as a starting point, in order to capture a share of the wealth creation those companies produce.

Media outlets feed our lives with breaking news on a constant basis. Bad news tends to dominate the headlines. Investing based on headlines could therefore prompt disinvestment, which is best avoided unless the cash is needed. The animation below demonstrates that bad news can dominate headlines, and can impact markets, but the decision to act on the information as an investor is a separate matter - assuming markets have already reacted to the new information is a reasonable approach. Markets have delivered significant growth in the past 20 years, despite the presence of pandemics, wars, and financial crises. In the sage words of the late Jack Bogle: 'Stay the course'.

We hope you found this animation interesting.