In hindsight, you were a brilliant investor

Greetings from the past!
 
Due to the vagaries of publishing, I can’t be sure when in the future you’re reading this.
 
Not too long, I expect. But to help you get your bearings, back here in the past we’ve just had a massive amount of rain in just a couple of days.

Oh, and we’ve also had a burst of enthusiasm that a Brexit deal is imminent.

Brexit, Brexit, go away

Rainfall comes and goes, but political history gets written in the history books – and often in the stock market records, too.
 
Big political shifts can send shares higher or lower. Wars and their end, elections, scandals – all can move markets.
 
True, Brexit is more like the British weather than the typical political crisis – it’s an endless conversation topic, you never get what you expect, and it’s more often than not a letdown.
 
But still, back here in the past we’re enthusiastic this might be the big one for Brexit.
 
Of course, you in the future know better than me.

Britain in bloom

As I write this, we’ve just seen a day where the shares of UK companies focused on the domestic economy soared on hopes a no-deal Brexit will be avoided.
 
The High Street banks, UK home builders, retailers and real estate companies leapt 10% or more on word the UK and Irish governments might see a pathway out towards a deal.
 
Most of these shares yield over 5% and have long seemed cheap. But they’ve been hard to buy if you’re gloomy about what an unplanned EU exit could do to Great Britain PLC.
 
The pound rallied, too. Fools may have seen their funds that hold shares listed overseas slide lower even as their domestic stocks rose – not because a tidy Brexit is unwelcome news for the rest of the world, but simply due to currency swings and roundabouts.

Time travelled

Now I know what you’re thinking.
 
I just don’t know exactly what you’re thinking.
 
From your vantage point in the future, your response to everything I’ve written so far will be something like one of these:
 

• “Pfft! How naïve! People were silly to get their hopes up that the puzzle of Brexit could be squared away so easily. No wonder shares fell when reality dawned!”

• “Pfft! Bit late to tell us this now! Everyone knew UK shares would soar when Brexit was resolved, so you should have urged us to load up before the deal was agreed!”

• “Pfft! You thought something would change? Of course the Brexit back and forth continues. We’re no closer to a deal and we’re no closer to no-deal. UK shares will remain mired in the doldrums indefinitely.”

Perhaps in your future it is obvious which one of these responses you’ll snort back to me down the ages.
 
But I assure you it’s not obvious from back here in the past.

Crystal balls

What’s the point of all this temporal-philosophical musing, from a man who freely admits he knows less than you do about the world you find yourself in today?
 
Well, for one thing, it’s so you don’t beat yourself up when Brexit is finally resolved and you’re not about to make a cameo in your own version of The Wolf of Wall Street or The Big Short on account of your prescient market-crushing returns.
 
Faced with the unprecedented uncertainty of Brexit, I believe the only rational response is to diversify your portfolio in such a way that it’s robust to all three potential outcomes – a deal, a no-deal, and a big kick of the can down the road.
 
Which means more middle-of-the-road returns than making a killing, either way.
 
From where you sit that may seem defeatist, but remember you have information we don’t have back here. It only seems obvious in retrospect.
 
And that is the wider point. Hindsight bias is the most difficult behavioral bias to stay alert to, because its great impact is not in the decisions you make for the future, but in the way we represent – or distort – the choices we made in the past.
 
People often look back and say the market was irrational or shortsighted or panicking without remembering you know one thing that would be more valuable back then than anything even the richest and most informed investors could buy until very recently.
 
Which is… you know what actually happened.