Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 459

Is the investing landscape really different this time?

Everyone knows that the four most dangerous words in investment are ‘This Time It's Different’. Sometimes, it is. More often, things end up much the same. The challenge is knowing which it will be.

My investing lifetime has witnessed some seismic changes and the associated market reactions to them. The dot.com bubble and the financial crisis have been the most striking examples. In both cases, there was no shortage of people claiming to spot the end of one era and the start of something quite different. Very often during the 40 years from the end of the 1970s until Covid, the pre- and post-crisis worlds didn’t look so very different.

So, my instinctive response to an investment bank research note arguing that the pandemic has changed everything is scepticism. This reaction is always magnified when the word ‘postmodern’ is thrown into the headline for effect. For the same reason that you don’t ask a barber if you need a haircut, you might beware of asking Goldman Sachs if you should be ‘positioning for secular change’.

Highlighting four ways markets have changed

But I’m being a tad unfair. The note does highlight four important ways in which the past two years may have radically altered the landscape for investors. Only time will tell whether this necessitates an overhaul of our portfolios, and it would be great if we could wait and see.

Unfortunately, that isn’t how investing works. In the absence of a crystal ball, we have to judge now whether the changes are as drastic as billed - and act accordingly.

No surprise about change number one - the re-emergence of inflation after a long hibernation. Arguably, it was tamed by Fed chairman Paul Volcker in the early 1980s and kept in its box for 40 years by a fortuitous sequence of events that included the de-politicisation of monetary policy in the 1990s, the emergence of China as a source of cheap labour from 2001 and finally the deleveraging and demand shock caused by the financial crisis in 2008.

The pandemic brought this happy run to a halt, with households buoyed by stay-at-home savings and wage support schemes in connection with coronavirus lockdowns, and the inflationary impact of gummed up supply chains and the war in Ukraine more than offsetting the initial fall in demand during lockdown. Central banks are now running to catch up with the potential wage-price spiral that threatens to lock in inflationary expectations. We have been here before. In the late 1960s inflation was not a problem until it was suddenly a big one. And investing in an environment of persistent inflation is clearly going to be very different from what served us well during four decades of relentless disinflation.

Change number two was in evidence well before Covid, but the virus and the war have accelerated a process that was already underway. About the same time that inflation was being Volckerised by the Fed, governments on both sides of the Atlantic were setting in train another revolution. The era of deregulation and privatisation may look as dated as big hair and shoulder pads, but it took a pandemic and war to confirm the fragility of the globalised economy they enabled. Localisation, resilience, and national champions will be the successors to complex, interconnected systems that require everything to go right without fail and which have let us down when that happen.

The third change highlighted by the Goldman Sachs note is related to the first two. Most of the past 40 years have been characterised by cheap and abundant labour and commodities, which removed the need to invest in greater efficiency that was one positive outcome of the shortages and high cost of both of these in the 1970s. The move from global to local will make labour markets ever tighter in future while it will take years to repair the lack of investment in commodity production, even assuming the ESG agenda allows it. For investors that means taking a much closer look at companies’ exposure to energy and labour costs, because the winners going forward will be those less affected by these inputs and those helping other companies to mitigate their impacts through technology and other efficiency measures.

Change four, and the one that may turn out to be the most consequential for investors, is the political shift from small to bigger and more interventionist government. We have moved a long way from Ronald Reagan’s assertion that government is not the solution but the problem. And from the government surpluses that this hands-off approach enabled.

Here, too, the pandemic has been more influential than the financial crisis, which also initially prompted higher government spending but then replaced it with austerity thanks to a belief that bailing out banks was a form of moral hazard. There has been less squeamishness about pandemic-related spending and the habit may be hard to break in an era of more overt populism.

What about war, decarbonising and energy security?

Social and welfare spending is likely to be just the start of it. The new Cold War ignited by Putin’s aggression in Ukraine has encouraged governments to seek to increase defence spending and they have been pushing on an open door. President Biden secured a bigger defence package than he first asked for after both sides of the House thought he hadn’t gone far enough. Germany’s defence U-turn has been broadly welcomed at home.

And that’s before we have even started to talk about the twin imperatives of de-carbonisation and greater energy security. Put this all together with an older fixed asset base than at any time since the 1950s and there may be a capex boom in years to come.

Does this alter everything for investors? Are we really entering a new postmodern era? Should we let our friends at Goldman Sachs reposition our portfolios for secular change? That depends whether you agree that it really is different this time.

 

Tom Stevenson is an Investment Director at Fidelity International, a sponsor of Firstlinks. This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL 409340 (‘Fidelity Australia’), a member of the FIL Limited group of companies commonly known as Fidelity International. This document is intended as general information only. You should consider the relevant Product Disclosure Statement available on our website www.fidelity.com.au.

For more articles and papers from Fidelity, please click here.

© 2021 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

 

  •   25 May 2022
  • 3
  •      
  •   

RELATED ARTICLES

Does gold still deserve a place in a diversified portfolio?

What Warren Buffett isn’t saying speaks volumes

Portfolio construction in the real world

banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Latest Updates

Financial planning

How much does it really cost to raise a child?

With fertility rates at a record low, many say young people aren’t having kids because they’re too expensive. Turns out, it’s not that simple and there are likely other factors at play.

Exchange traded products

Passive ETF investors may be in for a rude shock

Passive ETFs have become wildly popular just as markets, especially the US, reach extreme valuations. For long-term investors, these ETFs make sense, though if you're investing in them to chase performance, look out below.

Shares

Bank reporting season scorecard November 2025

The Big Four banks shrugged off doomsayers with their recent results, posting low loan losses, solid margins, and rising dividends. It underscores their resilience, but lofty valuations mean it’s time to be selective. 

Investment strategies

The real winners from the AI rush

AI is booming, but like the 19th-century gold rush, the real profits may go to those supplying the tools and energy, not the companies at the centre of the rush.

Economy

Why economic forecasts are rarely right (but we still need them)

Economic experts, including the RBA, get plenty of forecasts wrong, but that doesn't make such forecasts worthless. The key isn't to predict perfectly – it's to understand the range of possibilities and plan accordingly.

Strategy

13 reflections on wealth and philanthropy

Wealth keeps growing, yet few ask “how much is enough?” or what their kids truly need. After 23 years in philanthropy, I’ve seen how unexamined wealth can limit impact, and why Australia needs a stronger giving culture.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.