Cremnophobia

There is a fascinating engineering marvel located at Eagle Point in the western part of the Grand Canyon.  The Skywalk sits 4,000 ft. above the Colorado River on the cliff-edge at the Grand Canyon.  According to their website, it has the capability to bear the weight of 70, 747 passenger aircraft.  Despite all of this sophisticated over-engineering, tourists from all over the world are fearful of taking that first step on to the clear glass surface.  Once out on the glass however, many claim to have the most exhilarating and breathtaking experience of their lives. 

Overcoming cremnophobia, fear of cliffs, can be a daunting challenge, and some people never build up the courage to take that first step of faith.  The same can be said of our investment world.  There will always be a reason to not invest in financial markets.  There will always be reasons to be fearful, whether it is slower-growth, higher interest rates, political instability, wars, inflation, or valuations, reasons abound.  All these fears can be translated into uncertainty, but it is uncertainty and fear itself that creates the opportunity for potential future reward. 

Source: JPMorgan

Source: JPMorgan

Let’s take emerging markets as an example.  As of September 30th, the MSCI Emerging Market index was down -7.4% in USD (YTD), and down -2.6% in Local Currency (YTD).  Many investors because of trade war rhetoric and political skepticism have shied away from emerging markets this year.  I would suggest the long-term reasons for owning emerging markets remain intact.  Valuations are more attractive compared to developed markets, GDP growth expectations are higher, and long-term growth of the middle class is likely to fuel positive momentum in emerging markets for decades.  Given this mismatch of short-term fear vs. long-term potential, we think that emerging market value may be one of the most compelling asset classes right now.

Source: JPMorgan

Source: JPMorgan

This is probably the most used chart in our office that helps illustrate the long-term positive trend in the financial markets.  Despite many reasons and fears to not invest, overcoming those fears has proven to be the correct choice throughout history.  As advisors we must attempt to help clients overcome cremnophobia as it applies to their investments.  We must also try to overcome those fears ourselves.  It is always difficult to look through the negativity in the news and overcome the fear.  Overcoming the fears, just as tourists took a step onto the glass surface of the Skywalk, can potentially result in a breathtaking reward. 

 

Disclosures

Adaptive Wealth Strategies is an investment division of Carroll Financial, a Registered Investment Advisor.  Advisory services offered through Carroll Financial Associates, Inc., a Registered Investment Advisor.  Orders to buy or sell securities cannot be accepted via e-mail or voicemail. E-mail correspondence is routinely monitored for regulatory compliance purposes. Everything we’ve discussed is just our opinions, they should not be construed as a suggestion to buy or sell any specific investment.  All Information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results.  You cannot invest directly in an index.  Past performance does not guarantee future results.