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The future is a foreign country 

Ten years ago, when Queen Elizabeth celebrated her diamond jubilee, stock markets were experiencing a volatile year as they climbed, and slipped, on a wall of worry. The US was lurching from one debt ceiling crisis to another, the UK was adapting to life under austerity, and the eurozone was in crisis with the survival of the euro in serious doubt. Then-ECB president Mario Draghi was a month or so away from pronouncing those three crucial words: “whatever it takes”.

Brexit was years away – David Cameron would not announce his plan to hold a referendum on the UK’s EU membership until the following year and it would be three years before it secured a place in the Queen’s Speech following the Conservatives’ 2015 election victory.

In 2012 Apple, Meta (then Facebook), Amazon, Alphabet (then Google) and Netflix were only at the start of their extraordinary journey of outperformance. The term Faang had not yet been coined, nor its sister acronym Fanmags. Crypto currencies were in their infancy and niche – in fact they didn’t really grab the limelight until the second half of the past decade. China was still a growth star in 2012 and the narrative on emerging markets was very much focused on the golden opportunity that lay within them, an orthodoxy that is now being challenged.

In 2012, we were in a post financial crash world, where inflation had drifted above the 2 per cent target but was falling satisfactorily. Now we are in a post pandemic world with a war raging in eastern Europe, throwing out dangerous sparks. Inflation has climbed to multi-decade highs around the world – it’s at a 40-year high in the UK – and will be difficult to rein in. It is a chief factor in the deteriorating economic outlook. 

Back then alarm bells on climate change had been ringing for some time and tackling the issue was already under way, but it wasn’t until the Paris agreement of 2015 that a significant change of pace and scope occurred. But climate change – and other aspects of ESG – did not, as they do now, dominate investment discussions, did not drive financial planning decisions, did not provoke heated debate or get people suspended from their jobs. The battle for investors’ minds, and their wallets, as Philip Ryland describes it in his in depth feature, had not started in earnest.

Peak oil was the big worry – how much oil was left and how many barrels would be produced annually – totally drowning out any calls to cut usage. The idea that a major producer such as Shell would be challenged in a courtroom over the speed of its plans to cut emissions was unthinkable. Of course, in other ways, not much has changed. The world’s fossil fuel addiction remains strong, for all the momentum behind the drive to transition to green energy. Global emissions may have fallen when the world went into lockdown but the drop was temporary. 

Nevertheless, in a single decade there have been remarkable shifts in how we think, in themes and trends, in markets and in geopolitics. Globalisation is in reverse as pandemic and war-induced disruptions to global supply chains, rising geopolitical tensions and a decoupling of east and west push companies to rethink how they source supplies. Cracks have appeared in the sacred doctrine of the 60:40 equities to bonds approach to portfolio construction and not simply because of how those asset classes have behaved in recent years, but also because of pension freedoms. 

Looking back is engaging as well as educational. We know that if we do not learn from the mistakes of the past, we will always be condemned to repeat them (think boom and crypto parallels here). And hindsight can bring into relief the clues, invisible at the time, that point to future outperformers. But the past cannot reveal the future. No one 10 years ago could have predicted the set of circumstances that we find ourselves in now, or, 70 years ago, identified the changes that have taken place during the span of the Queen’s reign. Investment success therefore necessarily means always thinking about what lies ahead, watching for new threats and opportunities, considering how to navigate them and how they interplay with our portfolios. In this week’s super-early edition (to my knowledge we have never published an issue on a Wednesday before) because of the Jubilee double bank holiday, we have combined a look back at history (How markets have changed in 70 years; Learning from the world's oldest companies and Moving with the times ) with our more usual mix of forward-looking features (What is a realistic portfolio income yield? Investing in a polarised world, and A crop of durable funds for diversity).