It is very easy to get caught up in the plethora of short-term noise we have in markets today, thanks to 24/7 analysis and social media. 
News is circulated the moment it breaks as someone somewhere in the world will be awake and able to spread the word. The advent of the internet and the explosion in social media has been one of the greatest advances in communication and democratic transparency known to man but with it comes the risk of information overload.
A vital part of today’s investor skillset is the ability to sift through all the noise and drill down into what is important and relevant.
There is more information to analyse on any subject than there is time available and so time-efficient identification of the key variables ahead of making an investment decision is key to avoid perpetual indecision and paralysis.
The current Brexit campaign is a case in point.
Both sides are ramping up their campaign this week now that the local elections, including the London Mayor, are out of the way. Boris Johnson is coming to a hustings near you!
As with all electoral campaigns, the politicians love doing what comes easiest to them – talking and a lot of it. Much of the public have already become jaundiced with the whole affair and bored with the debate as no-one knows what or whom to believe.
The various claims and counter-claims are impossible to verify, with any statement from either side being immediately countered with a supposedly correct fact.
We have not yet encountered either side agreeing on anything. The whole debate is centred around disagreeing with the other side on every issue.
This means that it is virtually impossible for the poor voter to know where the common ground is and what is factually correct. This spells utter confusion and probably shifts the outcome to the status quo because when human beings are faced with a choice of leap or do nothing in the face of significant factual uncertainty, they tend to default to ‘better the devil you know’.
This is also true in investment markets when we examine the behaviour of the private investor.
When faced with uncertainty and fear, there is an overwhelming tendency to sit tight and do nothing rather than take the plunge, which feels like a risky gamble which could go horribly wrong.
If the Brexit debate continues in this way, a confused public will most likely vote for the status quo as why take a risk when we have full employment, economic growth and relative prosperity?
Voting for a radical alternative is an action of desperation and we only have to look to Greece for evidence of that where the economic picture was dire under the previous pro-austerity, pro-EU government.
This led to the election of Prime Minister Tsipras from the radical left wing Syriza party on the basis that anything was worth trying to improve the economic situation.
We have seen similar economic hardship in France lead to a rise in support for the right wing National Front. Is this really where we are in the UK such that enough people will vote for change? We will see on the 23rd June!
Coming back to the bigger picture, with all this focus on Brexit, this now appears to be an event of global importance and featuring in the strategic missives of international economic commentators.
It is increasingly becoming obvious that if we do choose to exit the EU, we will see a major market shock as this outcome is not currently priced in. That said, if we do vote to remain, then there are a number of sectors that are currently depressed ahead of uncertainty around the outcome.
This creates opportunity but not without risks of course.
The natural reaction of investors is to stand back and await the outcome. However, we should not ignore the fact that the FTSE-100 is still over 13 per cent below the all-time high achieved in April 2015 and yields an average of 4 per cent.
The alternatives available either yield less, significantly less in the case of investable fixed interest and cash, or look increasingly expensive in the case of some areas of commercial property. The risk/return relationship for equities does rather argue against being underweight when the alternatives are relatively unattractive.
Price and total return performance of index over 1yr
Source: FE Analytics
The newswires would have us believe that returns have been poor over the last twelve months with the FTSE-100 showing a fall of -11.65 per cent for the year to 6th May 2016.
Psychologically this drains investor confidence with a generally bearish sentiment pervading as this is the most widely followed index in the UK. However, if we build in dividends, this twelve month return improves to -8.14 per cent and if we broaden this out to the FTSE All Share, the return is -6.85 per cent.
Delving yet deeper, the FTSE 250 has returned -1.74 per cent on the same basis whilst the FTSE Small Cap has grown by 0.09 per cent. If ever there was an argument for active management where your investment manager chooses where to actively weight investors’ funds, this is it.
If we then look overseas, in sterling terms, the S&P 500 has grown by 6.12 per cent so not all is as dark as it may appear, although most other overseas equity markets are down between 2 per cent and 20 per cent from Japan to Hong Kong.
This illustrates the need for active asset allocation as well. This is why the returns from our collective portfolios are winning awards with the most defensive returning 0.72 per cent after charges and the most adventurous returning -1.86 per cent on the same basis.
This is achieved by always implementing investment policy on a twelve month view and looking through short-term noise and focusing on the bigger picture.
As an investor, if you are currently standing back hoping for lower prices, you have to ask yourself, what is going to trigger selling from here as those who are nervous ahead of Brexit should already have sold, unless they really are paralysed by fear and are yet to capitulate as the date approaches.
We know a lot about the weak US earnings season and the slowdown in China so a new negative is needed from here. With the oil price stabilising and some rationality returning, sitting on cash may prove very costly.
Guy Stephens is managing director at Rowan Dartington Signature. All the views expressed above are his own and shouldn’t be taken as investment advice.
