It makes me think of a tennis player who must deal with numerous uncertain and unpredictable factors, such as weather conditions (wind, heat, sun, etc.), the playing style of their opponent, court surface, balls, officiating, and so on. Each of these factors can significantly impact the course of a match and make the difference between victory and defeat, hence the stress they may generate.
The only thing a tennis player can do to prepare for a match is to focus on the few elements within their control: pre-match preparation, match strategy, general attitude, etc. As for other factors that are unpredictable and beyond their control, all they can do is expect any eventuality and be ready to adapt as best they can. For example, if it is very windy, they may adjust their strategy to counter or take advantage of the wind’s effects.
For me, it is the same when it comes to investing. The only thing an investor can do is concentrate on factors within their control and mentally prepare for any eventuality.
What elements can we control as investors?
– The stocks we hold in our portfolio. Stock markets have performed particularly well in recent months, and everything seems to be going well in the market. Perhaps we should take advantage of this context to tidy up our portfolio by selling companies in which we have little confidence in their business models or long-term prospects.
– The construction of our portfolio. Depending on the context, we can adjust our portfolio to lean towards more “dynamic” or more “defensive” stocks.
– We can adjust our portfolio’s cash levels. I often believe it is preferable to be almost fully invested, but nothing stops us from slightly increasing cash levels when we observe fewer market opportunities.
– Be ready for opportunities. In times of high uncertainty, stock markets tend to become more volatile, both upwards and downwards. With Trump leading the United States, it is possible that some sectors will be advantaged while others will be affected. Certain stocks may correct, creating potential opportunities for the long-term investor. It is thus wise to keep a watchful eye and be ready to seize opportunities as they arise.
– Think long term. Even if the short- and medium-term outlook is unclear, it remains favorable in the long term, over a period of 10 years or more.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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