Earlier this week, Bloomberg reported on a survey conducted by Bank of America Merrill Lynch which showed that chief financial officers (CFOs) in Singapore are the most pessimistic of the bunch among their peers across Asia. According to survey results, only 37% of CFOs in Singapore expect earnings to grow this year, compared to the average of around 75% in the countries surveyed, which include heavyweights like Hong Kong, China, and Japan. With the debt crisis in Greece, the stock market collapse in China, the wars in the Middle East, the fall in Indonesia’s rupiah, and the corruption scandal taking…
Earlier this week, Bloomberg reported on a survey conducted by Bank of America Merrill Lynch which showed that chief financial officers (CFOs) in Singapore are the most pessimistic of the bunch among their peers across Asia.
According to survey results, only 37% of CFOs in Singapore expect earnings to grow this year, compared to the average of around 75% in the countries surveyed, which include heavyweights like Hong Kong, China, and Japan.
With the debt crisis in Greece, the stock market collapse in China, the wars in the Middle East, the fall in Indonesia’s rupiah, and the corruption scandal taking place in Malaysia, are CFOs in Singapore right to be pessimistic about the short-term future outlook for Singapore businesses?
They may or may not be right over the short-term. But what’s more important is for investors to cast their eyes over a far more important time horizon – the long-term.
It may be true that the world seems like a chaotic place now given the issues I raised earlier. But then again, the world has always had its fair share of crazy.
In the 1940s, there was World War II – the whole world was at war.
In the 1950s and 1960s, most of Asia was in a struggle to form nations and were often engaged in civil wars.
In the 1970s, wars broke out in the Middle East, and a genocide even happened in Cambodia, a Southeast Asian neighbour to Singapore.
Throughout the late 1940s to early 1990s, there was also severe tension between United States and the old Soviet Union (this was known as the Cold War).
And for a taste of how zany the world had been from the 1990s till today, you can check out this piece from my colleague Chong Ser Jing.
The point about dredging all these old history up is to show that there has hardly been any period of time in history when the world was truly peaceful and everything is rosy.
And yet, the Dow Jones Index, one of America’s oldest stock market benchmarks, has surged manifold from just 60 points in the 1900s to more than 17,000 today.
There’s a much shorter history for Singapore’s stock market, but there are some good long-term measures to look at too. For instance, Singapore’s market barometer, the Straits Times Index (SGX: ^STI), as tracked by the SPDR STI ETF (SGX: ES3), has generated a total annual return of around 8.4% since 2002, more than 13 years ago; an 8.4% annual return can double your money every nine years, so that’s not too shabby at all.
What these long-term returns show us is that even though the economy and the financial markets can get whip-sawed over the short-term, we need to look beyond that.
What’s next after the Greece debt crisis? What’s next after China’s stock market has found its bottom? Do you think people will just mope around without working to better their lives? Or do you think they’d take some time to mend their wounds, but then pick themselves up and strive toward a better future again?
The CFOs in Singapore may be pessimistic about this year’s outlook and they may jolly well be right. But does it really matter? For the majority of us who are decades away from retirement and with lots of human capital to spare (and even for those who are in retirement but have decades ahead in their lives), the important question is: How do you feel about the long-term future of businesses in Singapore and in Asia 10, 20, 30, even 50 years from now? Will we prosper or will we suffer?
My colleague Morgan Housel once quoted Josh Brown with this phrase: “Count the perma bears on the Forbes 400 list or the amount of pessimists who run companies in the Fortune 500. You will find none.” It pays to be a rational optimist for the long-term. What do you think?
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned above.