The financial news cycle is a relentless beast, churning out a constant stream of narratives that capture investor attention and drive market sentiment.
These narratives, often compelling and seemingly insightful, can exert a powerful influence on investment decisions.
Yet they are frequently short-lived and merely reflect temporary trends rather than enduring business realities. When long-term investors succumb to the allure of these fleeting narratives, it is usually detrimental to their long-term returns.
Investors are now facing numerous short-term narratives including around Trump’s tariff-politics and DeepSeek’s AI ‘Sputnik moment’. So it’s vital they need to remain patiently anchored to the principles of business advantages, the trajectories of large transformations, and long-term valuation.
One of the best ways to illustrate why this is so important is by showing how the recent performance of oil versus ‘advantaged tech’ (e.g. Amazon) has been at complete odds with the short-term narratives that prevailed three years earlier.
2022 – The Year of Oil and the Tech Wreck Narratives
You might remember that 2022 saw two strong short-term narratives emerge.
Oil companies became the darlings of the market. It was a year marked by geopolitical turmoil, soaring inflation, and a dramatic shift in investor sentiment. Energy prices skyrocketed in the wake of the Russia-Ukraine conflict.
Pundits proclaimed a new era of energy dominance. Oil stocks, they said, were poised for sustained outperformance. Even Warren Buffett was making big moves in the shares of oil and gas giant Occidental Petroleum.
And at the same time technology stocks, including the likes of Amazon, faced a brutal sell-off. Rising interest rates, fears of a recession, and concerns about slowing growth in the tech sector fueled a narrative of decline. Many investors responded and sold their tech holdings.
In the funds management industry – mostly geared to a misplaced focus on monthly relative performance – owning a tech leader like Amazon through this period was near-impossible.
The Long-Term Investor Anchors to First Principles – Advantages, Transformations, Valuation
Yet despite these narratives, the patient investor was taking a different approach. They were stepping back from the daily noise and adopting a long-term perspective.
By examining the composition of the US economy over nearly four decades, for example, they could see that while energy was hot now, it was the tech sector that was structurally increasing in its share of revenues and earnings.
That, of course, made sense given the ongoing proliferation of technology (including PCs, the internet, smartphones, and apps) in nearly all aspects of business and life. And with the AI revolution in full swing, one would expect this to accelerate from here.
By contrast, energy and materials, as shown below, remained a roughly constant as a share of the economy over time. Remember, these kinds of commodity industries are typically characterized by high competition, minimal pricing power, and investment returns roughly in line with capital costs over time.
When considering Amazon, the patient investor was blocking out short-term noise. Instead, they were appreciating its enduring advantages that deliver long-term market leadership and high returns on invested capital in areas of enormous global transformations, such as ecommerce, cloud computing, AI, digital advertising, as well as many emerging areas, such space and autonomous vehicles.
And while interest rates were relatively high in 2022, which impacted valuation multiples at the time, the patient investor was considering longer-term interest rates and looking through the effects of the immediate economic cycle. They could see that Covid-related stimulus and supply-chain disruptions would eventually unwind, and rates would start to come down.
Three Years Later – Tech’s Resurgence and Oil’s Stagnation
Fast forward to 2025, and the narrative has dramatically shifted. While oil prices have stabilized, they haven’t continued their meteoric rise, leaving many oil stocks trading sideways.
Meanwhile, the tech sector has come roaring back.
Fears of a prolonged tech slump have subsided, replaced by renewed optimism about the transformative power of AI. Companies like Amazon have again demonstrated their ability to deliver exceptional earnings growth and investor returns.
In the Long-Term it is Advantaged Businesses That Win
The contrasting trajectories of oil and advantaged technology stocks highlight a crucial lesson for investors: short-term market narratives are often misleading and can lead to poor investment decisions.
While narratives can capture the zeitgeist of the moment, they frequently fail to capture the relevant dynamics that will ultimately drive long-term value creation.
Many investors and financial journalists are inherently myopic in their outlook. They are captivated by the immediacy of current events, and anchored to daily price movements, economic data, and geopolitical news. This short-term focus often distracts from the long-term forces that shape industries and determine the ultimate success (or failure) of businesses.
While the average holding period for large-cap US mutual funds is a mere 20 months, a testament to the pervasive short-termism in the market, long-term investors understand that true wealth is built by identifying and holding onto companies with sustainable competitive advantages, allowing the power of compounding to work its magic over time.
By ignoring the siren song of fleeting narratives and focusing on the enduring fundamentals of business, investors can navigate the turbulent waters of the market and achieve superior long-term success.
Note: Montaka is invested in Amazon
Andrew Macken is the Chief Investment Officer with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100 or leave us a line at montaka.com/contact-us
Podcast: Join the Montaka Global Investments team on Spotify as they chat about the market dynamics that shape their investing decisions in Spotlight Series Podcast. Follow along as we share real-time examples and investing tips that govern our stock picks. Click below to listen. Alternatively, click on this link:
The Tyranny of the Narrative: Why Long-Term Investors Should Ignore the Headlines
By Andrew Macken
The financial news cycle is a relentless beast, churning out a constant stream of narratives that capture investor attention and drive market sentiment.
These narratives, often compelling and seemingly insightful, can exert a powerful influence on investment decisions.
Yet they are frequently short-lived and merely reflect temporary trends rather than enduring business realities. When long-term investors succumb to the allure of these fleeting narratives, it is usually detrimental to their long-term returns.
Investors are now facing numerous short-term narratives including around Trump’s tariff-politics and DeepSeek’s AI ‘Sputnik moment’. So it’s vital they need to remain patiently anchored to the principles of business advantages, the trajectories of large transformations, and long-term valuation.
One of the best ways to illustrate why this is so important is by showing how the recent performance of oil versus ‘advantaged tech’ (e.g. Amazon) has been at complete odds with the short-term narratives that prevailed three years earlier.
2022 – The Year of Oil and the Tech Wreck Narratives
You might remember that 2022 saw two strong short-term narratives emerge.
Oil companies became the darlings of the market. It was a year marked by geopolitical turmoil, soaring inflation, and a dramatic shift in investor sentiment. Energy prices skyrocketed in the wake of the Russia-Ukraine conflict.
Pundits proclaimed a new era of energy dominance. Oil stocks, they said, were poised for sustained outperformance. Even Warren Buffett was making big moves in the shares of oil and gas giant Occidental Petroleum.
And at the same time technology stocks, including the likes of Amazon, faced a brutal sell-off. Rising interest rates, fears of a recession, and concerns about slowing growth in the tech sector fueled a narrative of decline. Many investors responded and sold their tech holdings.
In the funds management industry – mostly geared to a misplaced focus on monthly relative performance – owning a tech leader like Amazon through this period was near-impossible.
The Long-Term Investor Anchors to First Principles – Advantages, Transformations, Valuation
Yet despite these narratives, the patient investor was taking a different approach. They were stepping back from the daily noise and adopting a long-term perspective.
By examining the composition of the US economy over nearly four decades, for example, they could see that while energy was hot now, it was the tech sector that was structurally increasing in its share of revenues and earnings.
That, of course, made sense given the ongoing proliferation of technology (including PCs, the internet, smartphones, and apps) in nearly all aspects of business and life. And with the AI revolution in full swing, one would expect this to accelerate from here.
By contrast, energy and materials, as shown below, remained a roughly constant as a share of the economy over time. Remember, these kinds of commodity industries are typically characterized by high competition, minimal pricing power, and investment returns roughly in line with capital costs over time.
When considering Amazon, the patient investor was blocking out short-term noise. Instead, they were appreciating its enduring advantages that deliver long-term market leadership and high returns on invested capital in areas of enormous global transformations, such as ecommerce, cloud computing, AI, digital advertising, as well as many emerging areas, such space and autonomous vehicles.
And while interest rates were relatively high in 2022, which impacted valuation multiples at the time, the patient investor was considering longer-term interest rates and looking through the effects of the immediate economic cycle. They could see that Covid-related stimulus and supply-chain disruptions would eventually unwind, and rates would start to come down.
Three Years Later – Tech’s Resurgence and Oil’s Stagnation
Fast forward to 2025, and the narrative has dramatically shifted. While oil prices have stabilized, they haven’t continued their meteoric rise, leaving many oil stocks trading sideways.
Meanwhile, the tech sector has come roaring back.
Fears of a prolonged tech slump have subsided, replaced by renewed optimism about the transformative power of AI. Companies like Amazon have again demonstrated their ability to deliver exceptional earnings growth and investor returns.
In the Long-Term it is Advantaged Businesses That Win
The contrasting trajectories of oil and advantaged technology stocks highlight a crucial lesson for investors: short-term market narratives are often misleading and can lead to poor investment decisions.
While narratives can capture the zeitgeist of the moment, they frequently fail to capture the relevant dynamics that will ultimately drive long-term value creation.
Many investors and financial journalists are inherently myopic in their outlook. They are captivated by the immediacy of current events, and anchored to daily price movements, economic data, and geopolitical news. This short-term focus often distracts from the long-term forces that shape industries and determine the ultimate success (or failure) of businesses.
While the average holding period for large-cap US mutual funds is a mere 20 months, a testament to the pervasive short-termism in the market, long-term investors understand that true wealth is built by identifying and holding onto companies with sustainable competitive advantages, allowing the power of compounding to work its magic over time.
By ignoring the siren song of fleeting narratives and focusing on the enduring fundamentals of business, investors can navigate the turbulent waters of the market and achieve superior long-term success.
Note: Montaka is invested in AmazonRelated Insight
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