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Markets and Resilience

Manish Jain | March 26, 2021
Markets and Resilience

The year 2020 was an amazing year. Life, as we knew it, changed and the entire world went through a transition. Initially, we believed it would be all over in a few days, perhaps a couple of months at best. Today, I believe it will be a few years before we are ‘unmasked’.

As we progress into 2021, the discussion has moved from the virus to the vaccine. People are moving around more freely, some even carelessly. Transition fatigue and a monotonous routine seems to have infected people, more severely than the actual virus. We now yearn to go out freely and without fear, to travel near and far, to meet anyone we choose to and to eat out as and when we wish to.

I suppose that will have to wait. Patience and self-care are two critical learnings from this pandemic. If you have managed to learn these, to slow the pace of your life and enjoy what you already have, and learnt that ‘less is more’, you will emerge wiser. If you long for going back to the ‘good old days’ of rushing from one place to another, from one meeting to another, without a moment to pause and breathe, then you are headed for trouble.

The only thing that seems to be on a roll is the Sensex

The Sensex crashed to 25,000 on 23 March 2020, once the pandemic was made official. Since then, it has moved in just one direction – upward. It has now crossed the 50,000 mark – a phenomenal 100 percent rise in just 10 months.

In 1991, when I was a CA student, the Sensex was a tad below 1,000. At 50,000 today, it has shown a CAGR (compounded annual growth rate) of almost 14 percent since 1991. If you look at the point-to-point numbers, the returns from the index are 50 times. But the rise has not come without heartburns and crashes. The Harshad Mehta scam of 1992, the Asian financial crisis of 1997, the dotcom bust in 2000, the 9/11 attack in 2001, the Global Financial Crisis (GFC) of 2008 and the Global Pandemic in 2020 are some of the major upheavals during this period.

Despite all this, the markets have shown resilience. Today, in hindsight, these are just stories or incidents, but if you have been through one or all of them,you might remember how it feels when you are in the ‘eye of the storm’. Of course, all of us have been through the pandemic and have a first-hand experience of how it feels.

Investing is more about emotion and less about the technical aspects

Call it coincidence or providence, I discovered and enrolled for a year-long course to become a Certified Financial Transitionist (CeFT) in January 2019, when I was attending a seminar in Mumbai.  A CeFT looks at the emotional aspect of money and empathises with the transition that an investor is going through. We were taught to listen ‘deeply’ to what the client is/not saying, and to slow down the pace of decision making as the investor is going through a transition. He or she generally is not in the frame of mind of making quick, tactical decisions. The idea is to read between the words of the client and bring him or her to a safe place, as the first step. Thereafter, we were taught to guide the client through the transition using various tools, structures and practices.

Coming back to the pandemic, in the language of a CeFT, we started at the second phase, which is the ‘ending’. This typically lasts for a year or so before moving to the next phase called ‘passage’. This could last from anywhere from one to even four or five years. Currently, in March 2021, we have begun our journey in the ‘passage’ phase. The last phase, the ‘new normal’ is still some time away. That will be when we are able to speak of the pandemic in the past-tense. Just like we speak of the 2008 GFC today and how we dealt with it and emerged, scathed or otherwise.

Stay your course

If I was to look back on March-April 2020, there was panic and a sense of doom. We could not see light at the end of the tunnel, then. The headlines from across the globe portrayed a doomsday scenario right out of a Hollywood film. The ‘WhatsApp University’ only added to the skepticism, mistrust and pessimism. It was hard to put on a brave face and be optimistic about a brighter future. Today, things look much better. In short, those who stayed the course in their investments are much happier today. Those who panicked and cut loose are still waiting to re-enter the markets when a correction happens.

I am often asked when will the markets correct. I wish I knew. But I tell them, reset your asset allocation depending on the volatility you wish to expose your portfolio to and then enjoy the ride. After all, it’s not very often that you can theoretically get a 100 percent return in just 10 months. We should enjoy good times like these and not be skeptical. Some day in future, there will be a correction and the value of your portfolio will come down. Leave the pessimism for then.


Manish Jain

Manish is a Certified Financial Transitionist (CeFT®) and a Certified Financial Planner (CFP®) who guides people through their financial transitions. He did his schooling from Goethals Memorial School, Kurseong and is an alumnus of XLRI, Jamshedpur.

 

Currently based in Delhi, Manish is passionate about behavioural finance and investor psychology. Practicing mindfulness, listening to music and podcasts, going on long drives and enjoying an afternoon siesta are part of his work schedule. Thanks to the pandemic, YouTube cooking has been added to his routine.

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Max
Max
1 month ago

Good one MJ; I have learnt more about markets and financial planning (not really my forte) by simple small talks with you. Didn’t realise you took to cooking too…. keep ‘dishing’ out 😊

Tapas Kumar Bhattasaly
Tapas Kumar Bhattasaly
1 month ago

My dear friend Manish Jain with an exemplary financial mind has meticulously written this article taking into account the keep aspects of the sensitivities of Sensex. Thought provoking. Hope to read more such articles from MJ.

Jayanta Guin
Jayanta Guin
1 month ago

Great article. The thoughts and principles of investing are well aligned to principles of great American investor Jack Bogle.

Raja Kali
Raja Kali
1 month ago

Great article!

Gopal Singhania
Gopal Singhania
1 month ago

Balanced thoughts that should be at the back of every market-participant’s mind.
Well conveyed, Manish.

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