The Black Swan Capital 2024 Word of the Year

If your news feeds are like ours, you will have been inundated with the many words of the year in recent weeks. The word of the year is sometimes a word that captures the mood of the time, or sometimes is a newly made-up word.

This got us thinking, what is the word that best sums up 2024 for Black Swan Capital and our clients?

Here are some of the declarations for 2024:

Oxford word of the year 2024 is brain rot.

Collins word of the year was Brat.

Dictionary.com chose demure.

Cambridge Dictionary selected manifest!

The Economist went to ancient Greek and added a healthy dose of cynicism. They selected Kakistocracy. What does it mean? It can be described as a government in which the worst people are in charge, where a government is considered to be corrupt or incompetent. In a year of more than 60 countries going to the polls in 2024, it seems timely.

What do we think?

The Black Swan Capital word of 2024 is Ataraxia. We figure if The Economist can hark back to ancient Greek, so can we.

Ataraxia is described as maintaining one’s composure and focus in turbulent times. It is quite similar in meaning to what Buddhist philosophy calls equanimity.

In financial markets and global economies such as we experienced in 2024, with certain pockets of markets and some specific assets growing particularly strongly (and sometimes falling away again), it was an important time to maintain focus on the long term, and to not jump on bandwagons and chase yesterday’s top performer. When markets, or parts of markets do well, such as in 2024, it can be tempting to let greed drive investment decisions and expect that these assets will continue to go up forever.  Experience shows us this is not the case. Last year’s top performer is rarely at the top of the following year’s table. If you adopt a pattern of investing in the prior year’s top performing asset, or even asset class, you will probably get below average returns over the long term, always buying at a high and holding as markets return to their long-term average. The patchwork table below from the latest JP Morgan Guide to the Markets report is an illustration of this showing the relative performance of asset classes over the last 7 years.

Source: https://am.jpmorgan.com/nl/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

At the risk of getting technical, if we also consider their illustration showing the difference in the US stock market performance over the last 3 years (they use the S&P500 index for this) compared to the Magnificent 7 (that is seven companies: Meta, Alphabet, Amazon, Tesla, Nvidia, Apple, and Microsoft), it shows that most of the returns were driven by these seven companies. If you look closely, you will also see the rate of growth of this small sub-group is slowing in 2024.

 More broadly, we must expect and prepare for negative returns after periods of strong growth. The graph below shows this. It is on average around 6 to 8 years from one market peak to another and in between the markets will fall for a period of time. That is where diversification is important, so you don’t have all your assets in one place, such as the US stock market if that is not right for you, and, as is the theme of this article, maintaining your composure across market cycles can protect you. Ataraxia deployed.

Ataraxia is our word for 2024. It is not always easy to do in practice, in any aspect of your life. Speak with us at Black Swan Capital and we can help you to ensure your portfolio aligns to your life plans and to ensure it remains on track and you remain focused on what is most important to you. Contact us at info@blackswancapital.eu.