Perhaps the only thing we can say with absolute certainty – and which is becoming more predictable with each passing election or referendum – is that the pollsters got it very wrong again. No Democratic landslide or blue wave as they had widely forecast, which means political stalemate is the most likely outcome. And the financial professionals did not do much better, with all sorts of markets swinging wildly as the evening progressed – even though for weeks the market has seemingly been able to conjure up a new bullish narrative to accompany every twist and turn.
That may have amounted to a dream night for sharp traders, as will a period of volatility that may accompany a contested outcome. But for the rest of us it leaves us none the wiser as to how we position our portfolios for the next four years. That’s fine, though, because despite the hysteria and what seemed like the entire financial journalism industry staying up all night to watch presenters and pundits filling the airtime with largely pointless chatter, investment remains a long-term enterprise. Whoever becomes president in 2020 will have as much impact on our future wealth as whoever becomes president in 2036, a matter that is beyond prediction. I am glad I got my beauty sleep.
In the meantime, there is a cult that is perhaps far more dangerous to wealth creation than the personality cults that increasingly define politics: the cult of the dividend. Their lure to shareholders is powerful, which is why companies will go to huge lengths to keep paying them (even, as we found out, hanging on to emergency government handouts while returning money to shareholders). Its dangers are the subject of both our cover feature and Chris Dillow’s column this week, and, by coincidence, the focus of an interview given recently by Fundsmith manager Terry Smith. “You should never invest in equities for income,” he told Fund Insiders Forum, “you should invest in equities for the greatest total return that you can get. If you need to spend some money sell some of your holdings.”
And what does Terry Smith think the next 10 years have in store for markets. “I haven’t a clue” he said, unsurprisingly – which as the 18 per cent annualised return over the 10 years his flagship fund has been in business goes to show, you don’t need to second-guess the future, least of all predict election results, to invest well.
