Our yearning for (and invocation of) the past is ever-present (think cyclical fashion trends, art movements, the plethora of Oasis tribute bands, even).

Perhaps it’s no surprise that people are even more tempted to look to past events to try and make sense of today’s markets, which are undergoing an exceptional combination of technological disruption, geopolitical turmoil and valuations so historically elevated that even the most bullish of investors could be forgiven for thinking twice.

The AI fervour has reignited several comparisons (and invoked flashbacks for investors of a certain age) with the dot com boom and great financial crash of 2008. Meanwhile politics, inflation and fraying global alliances have continued to sway investor sentiment in real time.

Against such a tumultuous backdrop, we explore how useful history is when investors are trying to position themselves for what comes next. We asked our CIO Chris Darbyshire and our CEO Philip Harris, to discuss how historical precedent still informs the decisions taken in both public and private market investing, and where investors can risk misreading the lessons of the past.

CHRIS DARBYSHIRE: “I’d almost turn the question around slightly and say that, at the moment, it’s the difficulty in seeing patterns that look similar to the past which is making people believe there’s a completely new reality dawning that the old rules don’t apply anymore. You can probably argue that from the point of view of AI, it may well prove transformational over the long run, but if you take a broader historical perspective, you can still find parallels. The internet boom is probably the most obvious template, but people have also gone back and looked at things like the buildout of telegraph lines and other infrastructure booms to try and draw comparisons. My guess is that if you take a long enough historical view, you eventually come back to seeing a pattern that does encompass what we’re seeing now, both in terms of the enthusiasm around AI and the likely outcomes.”

PHILIP HARRIS: “I think that’s right, but it also depends on your timeframe. The real challenge for investors is deciding whether this is genuinely a paradigm shift or whether markets are simply wandering into something that eventually corrects itself. With AI, my own view is that once something has been created, it tends not to get disinvented and society builds on it. It’s a bit like going back to the moon. Before it happened, it was a dream, but once it’s been done, people keep pushing forward. That doesn’t mean there won’t be boom-and-bust cycles around it, which we saw with the internet, but over time the baseline gets rewritten. That’s why markets continue moving higher over the long run even after we’ve seen major corrections. The challenge for investors is for them to decide what type of investor they actually are. Are you trying to trade every short-term move, or are you taking a longer thematic view? Because if you’re constantly chasing the next thing, you can end up losing sight of the bigger structural shifts taking place underneath.”

CHRIS DARBYSHIRE: “One thing I’ve seen quite a lot recently is the assumption that oil price shocks are somehow less important than they used to be. Historically oil shocks can take several months to feed through into earnings, consumer behaviour and broader economic data. If you look back at the 1970s or even the 1990s, energy shocks were very damaging economically, and equity markets at the moment seem to be treating them as a relatively lightweight matter. I think there’s probably a misapprehension there around the risks. To really understand that, you need the historical perspective. You need to go back far enough to complete the sample set rather than only focusing on the most recent market environment.”

PHILIP HARRIS: “I totally agree with that, but the political backdrop is also very different now. Markets today are being influenced by the US president in a way we really haven’t seen before. In the 1970s everybody was panicking about oil and inflation, but you didn’t have military strategy, trade policy and economic signalling effectively being played out on social media in real time. A single political statement can move oil dramatically within minutes. Immediacy also changes investor behaviour. Markets are reacting constantly to headlines and personalities, which creates a different dynamic from previous cycles, even if some of the underlying economic lessons are still the same.”

CHRIS DARBYSHIRE: “I think it’s much harder for public market investors because you’re constantly exposed to fashion. A trade can emerge very quickly and become incredibly successful within a few months, and then investors have to decide whether to chase it or not. If you didn’t happen to have exposure to that theme already, you suddenly face the pressure of underperforming benchmarks or peers, and that’s why public market investors can become victims of fashion much more easily. In private markets, by contrast, each deal tends to have a four- or five-year time span attached to it. The focus is much more linked to business fundamentals, cash generation and whether the investment thesis will still hold several years down the line.”

PHILIP HARRIS: "I think the principles are actually very similar in private markets, it’s just that you’re committing to them for much longer. If something is fashionable today, you may have to hold it for five years before you know whether the thesis really worked. That naturally makes private market investors less faddy because, once you’re in, you’re effectively married to the investment for a period of time. You can’t just sell tomorrow because sentiment changes. In liquid markets, what’s sexy today can be sold tomorrow morning. In private markets, you have to think much more structurally about sectors, themes and long-term outcomes rather than short-term market movements.”

CHRIS DARBYSHIRE: “One principle I still trust is globalisation. A year ago there was a lot of discussion around the death of globalisation because of tariffs, trade fragmentation and the weakening of multilateral institutions. But what we’ve actually seen is a global response which, in many ways, is re-establishing globalisation outside the American orbit. We’ve seen more trade agreements, more regional cooperation and more countries recognising that they simply can’t produce everything themselves. That underlying economic principle, that countries should focus on what they do best and trade for the rest, still feels fundamentally sound to me. In slower-growth economies especially, access to cheaper goods remains incredibly important for keeping inflation under control and maintaining political stability.”

PHILIP HARRIS: “The thing I still trust most is patience. Investors consistently get themselves into trouble by rushing into something because it’s fashionable or because they think they’re operating on the leading edge of the next big thing. Trying to live permanently on the bleeding edge is fraught with risk unless you have enormous amounts of information and infrastructure behind you. Most investors don’t. One thing I trust much less than I used to is the old assumption that gold is automatically where you go in times of crisis. That used to be almost sacred-cow thinking alongside things like the Swiss franc or the yen. Personally, I still think sovereign debt is probably the more reliable place investors tend to move when they genuinely want safety.”

CHRIS DARBYSHIRE: “I don’t think diversification is going away. Even if we are entering a radically different environment, diversification still improves risk-adjusted returns. That’s mathematical rather than fashionable. A lot of the instruments and technologies may evolve, but investors will still need portfolios capable of funding retirements, liabilities and long-term obligations. Cash flow still matters and economic fundamentals still matter. Even across very long periods of time, a lot of the core principles of finance and economics tend to remain surprisingly intact underneath all the noise.”

PHILIP HARRIS: “I think the fundamentals of human behaviour are probably more stable than people realise. Society will still have industrials, agriculture, consumer sectors and infrastructure – the underlying contents may change, but the need for those things doesn’t disappear. You can draw parallels all the way back to railways, telephones or other transformative technologies. The modern equivalent might be AI or compute power, but the pattern is broadly similar. Something new gets built, enthusiasm accelerates, capital floods in, and eventually markets work out what the sustainable value really is. In that sense, the format of investing may evolve, and technology will keep changing how we interact with money and markets, but the underlying drivers of risk, return and human behaviour are unlikely to disappear anytime soon.”

The early 20th-century poet Edward Thomas wrote that “the past is the only dead thing that smells sweet”. Its bittersweet sentiment underlies the trend for investors to draw parallels between the concrete events of yesteryear and the known unknowns of tomorrow. If nothing else, it also helps guide the insight and advice that Chris and Philip use for constructing portfolios with short and long-term horizons, while allocating capital with intention. Knowledge is power, after all.