| I recall a story in The House at Pooh Corner1 that, in my view, serves to make a critically important point to investors assessing the current investment environment. In Chapter VIII, Winnie-The-Pooh and Piglet are on their way to see Owl in the Great Forest. The wind is in their faces and increases in ferocity. In fact, it is getting so strong that upon reaching the shelter of the Hundred Acre Woods, Piglet, in a very frightened voice asks Pooh, "Supposing a tree fell down, Pooh, when we were underneath it?"
To which Pooh, after careful thought, replied, "Supposing it didn't."
It might seem a bit of a stretch to reference a line or two from a classic children's book as reason to suggest the 2007-2008 stock market decline from record highs to be at an end. My intent is not to make light of the situation, and let me assure you my analysis goes far deeper. Yet, at the story’s core is the sage investment advice of one Mr. Pooh Bear: just because the future is unknown does not presuppose the outcome to be negative.
To characterize the financial news and the condition of the world's capital markets over the past six months as unsettling is, well, an understatement. Members of the Federal Open Market Committee (FOMC) have publicly characterized the magnitude of the current financial turmoil—I am paraphrasing here—as dire. However, unlike many on Wall Street and in the financial press, the FOMC did not proclaim it unsolvable, intractable or irreversible.
In times of such uncertainty, the logical course of action amongst investors, pundits, strategists and the like has been to look to history for similar patterns to proclaim past as prologue, despite the knowledge that even the most comprehensive analyses of the past may have little correlation to future economic and financial realities.
So where does that leave investors today?
As I see it, despite some well-followed market metrics suggesting compelling stock valuations, cash allocations appear to be rising. In other words, investors seem convinced future prospects are negative.
How can they know for sure?
The answer is they can't.
In conclusion, let me offer this. The next time a commentary or report extrapolates today's headlines into tomorrow’s certainly bleak outcome, I encourage you to finish the story with the same question I do—supposing it doesn't? You might be surprised in the answer.
1 Milne, A.A., The House at Pooh Corner, Dutton Children's Books, New York, New York, ©1956
This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its
accuracy. The forecasts and opinions in this piece are not necessarily those of Van Kampen, and may not actually come to pass. Information
in this report does not pertain to any Van Kampen product and is not a solicitation for any product.
|
View pdf
Commentary Feeds
