The reaction to Pfizer’s vaccine announcement this week has highlighted just how short term the thinking in equity markets can be.
Stocks such as Zoom, which the market had bid up in a lockdown world, dropped sharply. Companies such as American Airlines, which had been heavily sold down this year, surged.
How much these businesses’ long-term prospects had been changed by the news of a successful vaccine trial must have been impossible to gauge in the moment, yet their share prices were making big double-digit moves.
For the CEO of Ninety One, Hendrik du Toit, this kind of short-term market behaviour only strengthens the case for long-term thinking.
‘Don’t try to second guess the vaccine race,’ he said. ‘Stick to a long-term investment agenda. And a key part of that agenda is consistent planning and therefore having strong investment portfolios that can take you through even the most unexpected scenarios.
‘Don’t get caught up in the vaccine excitement and momentum. What is important is a combination of robustness, resilience and valuation. Valuation has not disappeared. I think we have lost sense of valuation in this mad growth dash of the last few months.’
To have a truly long-term view, he added, you also cannot ignore the imperatives of sustainability.
Portfolios that don’t fully account for the reality that economies have to de-carbonise, that stranded assets are a significant risk, and that the energy transition is going to have impacts across multiple sectors are not going to serve their investors.
‘You have to ask if you are on the right side of resilience, valuation and history,’ said Du Toit. ‘You are not going to be able to pay those university fees and pensions in 10 years’ time if your portfolio is on the wrong side of history.’