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.