News & Insights

Business cycles, recession and timing the market

By Gary Reynolds

20 Oct 2023

Investment

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Higher interest rates and increased costs for businesses combined with a scarcity of labour could force companies to become more productive and be the catalyst for a period of rising standards of living. That’s the view of CIO Gary Reynolds.

The business cycle hasn’t been behaving “as everybody thought it would” and unlike previous ‘normal’ business cycles, periods of high interest rates haven’t seen unemployment take off. Nor have we seen the recession widely predicted last year. “The best explanation” is that instead of people losing their jobs and being laid off, companies are reducing their hiring plans. And even if we do slip into recession, “it’s unlikely to be a nasty recession.”

For employers, the labour market remains tight and in response, instead of taking on labour that remains scarce “we could be entering a period where companies are forced to be more innovative, and therefore they’re more productive.”

This is going to be the driver for the next ten years, which is really exciting. We’ve moved out of this low interest rate phase and we’re now getting to the point where companies “have to be clever and innovative.”

AI has the potential to be driving productivity and with it “improving standards of living.” AI also brings with it exciting investment opportunities for Courtiers. Not by investing directly in AI itself, where you’ll pay crazy multiples but in much cheaper companies “where AI will make a difference.”

Gary acknowledges that Courtiers investments are currently going through one of those inevitable periods where “you might not do as well as the market.” Where you could have got 5% in the bank this year, three years ago you wouldn’t get anything.

Referring to Courtiers’ impressive long-term performance Gary cautions that while you can try to time the market, “no one’s ever been successful at doing it.” He cites the example of Warren Buffett, “the world’s most successful ever investor”, and the old adage “It’s not about timing the market – it’s about time in the market.” That is the key to successful investing over the long term.

Gary Reynolds CFA Chief Investment Officer

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Disclaimer

This communication is for information purposes only and should not be relied upon in making an investment decision. The views expressed by individuals and the business are based on market conditions at the date of issue and are subject to change without notice. The mention of any stocks or shares should not be taken as recommendation to deal and does not take into account the individual investor’s investment objective or risk profile. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. Any third party sites, or pages which are linked to the document, have not been reviewed by us and therefore we accept no responsibility for the authors or content of external link or pages. If you are interested in any of Courtiers Asset Management Limited’s range of funds, or require any financial advice, please speak to a financial adviser.