November 2024
- What a week, it’s a week since a UK Budget that caused financial harm to some segments of the population most noticeably owners of Agriculture Land and Business owners, and we have the US election going on as I write whilst the UK and the US central banks confirm their interest rate decisions this week – wow!
- Generally, market activity has been subdued and there is some volatility as the market moves its bets one way and then the other as the betting changes on who will win the US election. Both outcomes are inflationary for the market so bad for bonds and not great for equities but better than bonds as long as the inflation does not become rampant.
- Geopolitical tensions are still high, especially in the Middle East but if the price of Oil and Gold are anything to go by, both falling recently, Crude Oil falling about 15% since April the violence is abating.
- Even with the uncertainty about the outcome of the US election investment markets are stable and US Corporate earnings are good but the growth in earnings has reduced but not stalled.
- See just below a brief reminder about how we set up our portfolios and a shout out to Mr Markowitz who developed the idea of Modern Portfolio Theory (MPT) which we use.
- “Markowitz’s genius was to realise a portfolio spread across lots of assets could have the same potential for returns as a more concentrated one but with less scope for losses, so in other words diversification allows investors to take less risk without sacrificing reward” quite some freebie and this is why we follow this process.
- Problems with the Chinese economy continues most of which centre on the property market even though there was a sudden surge when I wrote last month.
- The fixed interest market is still 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. Unfortunately yields have risen in the US and the UK which is bad news for our portfolios mainly due to a lot of borrowing in the UK and the US and the bond markets having their say.
- 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).
- 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.
- 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.
