July 2024
- Elections here, elections there, elections everywhere! It’s always an interesting time, especially with the Liz Truss experience still relatively fresh in all our minds, and there has been a whiff of this experience with French Bonds over the last week.
- In all the annual reviews I have hosted over the last few weeks the question of politics and the effect on the investment market of an election, has cropped up. Well, it depends; in the US should the Republicans win, the outlook is inflationary which is bad for growth in the US but good for the dollar and it won’t be good for US treasuries. Having said that, in the near term the inflationary beast in the US is being tamed by the ever-watchful Jay Powell. There will be few fireworks either way.
- I mentioned last month the rise in the big tech stocks in the US was continuing unabated, however, since then Nvidia has been down as much as 15% having since recovered about 5% of that loss but the other big names continue to rise.
- Last month I also mentioned residential property being brought low and many selling due to government attention, this month I want to point out that two of the commercial property funds we place in client portfolios have returned 20% in the last year, this in addition to yields of circa 5% pa, Happy Days!
- China is still in the doldrums but fund managers selling their shares would have you believe otherwise.
- The fixed interest market is offering good opportunities for investors and this year has the potential to make up for some of the lost ground over the last two years. There is some movement at the long end of the curve as inflation in the UK continues to cool and the prospect of interest rate reductions increase.
- Oil prices are steadying now but are still volatile.
- What are we getting right:
- Staying away from direct investments in China.
- Selling low and buying low.
- Getting into Japan early (at least a year ago, the rest are only just catching up).
- Getting into Europe early.
- Invested in Tech and staying with the US in general.
- Not selling off our Fixed Interest exposure and watching their value return.
- Watching out for cash accounts and short-dated bonds ceasing to offer attractive levels of return and what to do when this happens.
- Buying short-dated index-linked government bonds.
- What did we get wrong:
- Investments in Infrastructure and we took too long to move away from Agriculture; however, these areas are being corrected.
- Our portfolios are holding up well because:
- Investing in underlying assets directly i.e., government gilts and high-quality corporate bonds.
- We continue to look out for structured products to place in our portfolios because by doing so introduces a certainty ingredient. However, they are not offering the risk-free returns they were.
- Our portfolios use fixed interest and fixed interest investments suffer when interest rates are high and there is more supply – this affects their value negatively. It should be remembered however, with fixed interest, you get your money back at maturity (which is not the case with other investments), so it’s a matter of holding these investments until interest rates start to come down or the investment matures.
Please note that:
- This information in isolation is not financial advice.
- Past Performance of investments is not to be relied on and the value and the income from investments can go up as well as down.
- It is advisable to regularly review your investments.
