No one knows what lies ahead - distrust anyone who claims otherwise

A couple of weeks ago, I watched an interview with Nicolas Hieronimus, the CEO of the beauty company, L’Oréal. Asked about an approaching recession, Hieronimus answered that after two years of lockdowns beauty hadn't slowed at all. Even inflation had not generated a shift to cheaper products. Luxury remained healthy as the upper and middle classes of the world continued to multiply, and to grow sales L'Oréal was increasingly using data and advanced technology to help customers choose fragrances and skin and hair products that suited their personalities. 

Heartened by Heironimus' enthusiasm, I was eager to add the stock to our portfolios, but stood back, mindful of the stern warnings droned by choruses of economists, analysts, and financial commentators about the grim times that lay ahead.

In only a few months, the US Federal Reserve's tone had veered from complacency to panic, and from growth to slump. These mood swings had left investors confused and uncertain. The Federal Reserve wanted orderliness – slowing growth, tightening financial conditions, and easing equity prices. Instead, it created chaos and disarray.

This was hardly the backdrop to reel-in investors. So, it was no surprise that they turned their backs on the equity, bond, and property markets. No asset class seemed to offer them shelter from this ghastly storm.

Yet, even with this gale blowing, a number of businesses remain defiantly positive about the future.

At an investors' day, Benedetto Vigna, the CEO of Ferrari, assured investors that the offer of more desirable models would drive trading profit 50% higher by 2026. Semiconductor manufacturers such as Nvidia, Taiwan Semiconductors and Advanced Micro Devices reported increasing demand for their chips, underpinned by, among other things, megatrends in 5G and high-performance computing-related applications. ASML, a corporation that makes lithography machines for the semiconductor industry responded by promising to increase capacity to meet the expanding needs of its customers.

LVMH, Adyen, Salesforce, Microsoft, and NextEra Energy were among a host of other firms I explored that were positioning themselves for better times. My dilemma was, when does one start investing in these companies?

It's clear that conditions remain fragile, and until investors feel confident that inflation has peaked, and interest rates have stabilised, markets will remain volatile and difficult to forecast. But while investors might have resigned themselves to suffering a protracted period of hardship, businesses are less despairing, and continue to seek new ways to navigate the bends in the river - cutting costs, controlling working capital, improving operations, and investigating innovative ways to increase revenue.

History has taught us downturns are seldom, if ever, long-lasting, although forecasting when sentiment will turn positive is never easy. Markets are forward-looking and sense change far ahead of the event. So, recognising that inflation has peaked, and interest rates are coming down will probably only register once the market has rallied between 15 and 20 percent.

We have endured a harrowing six months, and the pain of further loss frightens us. It weighs heavily on our psyche. We're all worried. And you are not human if you're not worried. Understand, though that nobody has a firm grasp of what lies ahead, so distrust anyone who claims otherwise. Rather respond to what you know is happening and not to what other people tell you should happen.

You'll never be able to time the bottom of a market. Don't try. Follow your instincts. If you see something that looks tempting and the valuations appear attractive, don't dither – buy!