The power of small wins
By Carmel Fisher, Director
08 May, 2017
Last month New Zealand hosted the World Masters Games 2017. It was a massive event with some 25,000 participants competing across a myriad of sports. Participants came from all walks of life, and ordinary folk could find themselves competing with professional athletes and past Olympians, and sometimes winning (like our very own adviser, James Paterson, who won gold for his football skills).
I've spoken to several participants who just loved being part of the event and celebrated their results with disproportionate glee — "it was great, I finished 18th of 24 in the field"!
Markets displayed similarly disproportionate reactions during April, with relief rallies on insubstantial news.
The first round of the French election saw a broadly balanced result with centrist Emmanuel Macron winning 24% of the vote and the far right anti-Euro Marine Le Pen winning 21.3%. The real battle is still to be fought in the May 7 election, but investors were happy to celebrate nevertheless.
Similarly, President Trump announced his much anticipated tax plan, which contained few surprises and is unlikely to survive in its current form; but investors were nevertheless pleased to have something to react to, and react they did (positively).
Along with political developments, the US earnings reporting season and economic data releases in the US, Europe and Asia have been broadly neutral of late, but they've had a positive bias and these 'small wins' have resulted in an optimistic market tone and a return of the 'risk-on' trade.
While the market's optimism might look excessive based on the underlying news, we should not underestimate the power of small wins.
Pulitzer prize-winning journalist and author, Charles Duhigg said, "small wins are exactly what they sound like, and are a part of how keystone habits create widespread changes. A huge body of research has shown that small wins have enormous power, an influence disproportionate to the accomplishments of the victories themselves. Once one small win takes place, forces are set in motion that favour another small win."
Perhaps we should feel optimistic about the markets' optimism; it sure makes a pleasant change from the sense of impending doom that markets have struggled to shake off in recent years. If what we are experiencing is a shift away from the macro focus (interest rates, politics and geo-political issues) towards a bottom-up micro focus (considering the merits of individual investments) we should feel gleeful indeed.
As you know, the Fisher Funds investment team spends little time second-guessing big picture trends. They are almost impossible to pick ahead of time, becoming obvious only with the benefit of hindsight. We know that we can't control macro events, but we can control the construction of your portfolios to ensure that your funds are given every opportunity to perform.
We enjoyed a number of small wins during April, and actually towards the end of the month, we had some rather large wins as several of our international portfolio companies announced earnings results that the market rewarded with price gains. Long may the market remain optimistic and focused on the things that really matter!
Speaking of things that matter, we look forward to seeing many of you during May as the Fisher Funds 2017 Investment Roadshow hits your town. This is my last roadshow and it will be great to catch up with a lot of clients, many of whom have attended all of our roadshows over the past fifteen or so years. I'd like to take this opportunity to thank you for your continued support and for making my time at Fisher Funds a brilliant chapter in my life. I wish you every success for your future. As a fellow Fisher Funds client, I know you are in very good hands.