Its Not Harry

Comment and opinion for retail investors in the UK

Mark Potter

YAP – not as much of a change as you might think

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I refer to the news that Joe Biden has given in to the inevitable, which was not really sacrificing very much, given that in my opinion there was never any chance of him getting re-elected. If he really thought he could win, then it is indeed as well that he stood down!

The ‘anointing’ of his deputy Kamala Harris as the candidate, should that happen, is not likely to change many voter intentions at this stage, apart from those with limited thinking capacity, because a vote for Biden was always a vote for Harris anyway. I say that because I think that intelligent voters would have assessed the possibility of Biden dying or becoming incapable of fulfilling his duties properly over a full 4 years as quite high. That would have then put Harris in charge.

We don’t currently know if there will be any other candidates for the Democratic nomination. Someone emerging who is really charismatic and capable of challenging Trump may only be a pipe-dream for the ‘anyone but Trump’ crowd.

I personally think that the possibility of having a black woman as US president will appeal to a chunk of the electorate, but not many of those would have otherwise voted for Trump, so I can’t see a huge blocks of votes moving to the Democrats.

In terms of economics and markets. in the short term something unsatisfactory has been fixed (a lame duck Democrat nominee) but I would expect markets to be factoring in another Trump presidency nonetheless. It matters very little – the near term direction of interest rates is much more important.

YAP – A mini-inflection point?

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As a young person with a gun once again makes the news headlines again in the USA, I want to draw to your attention away from politics to 2 recent observations that I thought were significant amongst the ever-flowing tide of financial market news that I see every week. Taken together, they may well be flagging a change in equity market leadership, with value investing looking more attractive henceforth.

Artificial Idiocy, maybe?
  • The first observation was that in a recent sell off (as perceived) of US markets, in fact only the high growth, AI story driven stocks sold off – the main market was flat. The large market cap weighting of the big tech firms of course significantly influences the indices that include such stocks.
  • The second was that what should be very good news for growth stocks: the more and more definite statements that inflation is largely conquered (or let’s be honest, has come down for factors nothing to do with central bank actions) and that as a consequence, the Fed in the US can lower interest rates soon, has had virtually no impact on markets. It is suggested that this news is already in the price, as it were, so the only news on inflation and interest rates that might move markets (down) would the (bad) news that rates reductions are deferred again.

Taken together, those statements hint that the recent strong rally in growth stocks, especially those that can in any way be connected to AI, has run out of steam.

Skimming off profits from the technology sector is something you may well have already been doing. If not, now is the time to seriously think about it, I suggest.

Personally, I am somewhat convinced by the minority of commentators who say that the benefits of AI are more imagined than real, in terms of improved eceonomic performance. We could be seeing another ‘millenium bug’ con trick (an effective one, for sure) from the robber barons of the 21st century.

Deep Dive – July 2024

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Scores on the doors

As advertised, I thought it would be useful to take a look at the first half of 2024 and, after the UK election results which are the most significant ‘macro’ event for UK investors at this time, put out some ideas about asset allocation, where to re-invest those hefty tech fund gains and in general assist readers who are undertaking regular portfolio reviews, or maybe are even still building up their asset base from cash.

The elections in France have also been the subject of much media interest, but I am not sure the result will have much impact on European markets, and as I write this article, it is not really clear how a new French government will be formed. The significance is perhaps more about confidence in the Euro, but I never forget an old, only half jesting, comment that the Euro is only the New Deutschmark!

Some data to kick off

This table covers as many asset class categorisations as I think are relevant to my subscribers and in offering benchmark return data, I have not resticted example returns to a published market index or tracker ETFs, but in many cases shown an actual fund that I know is owned by many readers and would be considered a good market example, widely owned by many retail investors.

If you are interested in only what the main global indices would have returned, your data is in fact encapsulated in a ready made mix in the Vanguard Lifestrategy fund information supplied.

I have also this time added the results from the AFI model portfolios, which are maintained by a panel of the larger IFA/wealth manager groups in conjunction with Financial Express (the company behind Trustnet), the FTSE benchmarks that discretionary fund managers ought to be supplying to clients and also my own GIA account results. I have even left space for you put in yours, which you can get from a portfolio X-Ray!

[Read more…] about Deep Dive – July 2024

Yap – an anything else is better election wish

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It hard not to be surprised when one sees that a drift to the right in France is seen as a big negative by investors and many City commentators are saying that a Labour Landslide in the UK would restore Britain’s ‘safe haven’ status in the world.

Will the UK equity market return to leading the EMEA region, just as we have the Paris Olympics?

In fact, it is reported that foreign money is already flowing into UK markets in anticipation of the election result. The UK may well now have returned to looking safer than the rest of Europe to US investors.

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YAP – into extra time!

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More time needed to get results

The main headline I was gifted by the efforts of the England football team last evening!

I propose to write the Deep Dive monthly commentary as an assessment of markets over the first half of the year (a brief one – I am not one to waste your time on history) and more usefully, to look forward to the rest of the year with some pointers on asset allocation and risks.

To do that, I need to have resources available that are not going to be published for a week or two yet, so I will defer publication of my article until the second or possibly third week of July.

In the meantime, here is an anecdotal snippet.

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YAP – bottom Dollar?

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The very recent ending of the Saudia Arabian agreement with US to prioritise oil orders placed in Dollars (signed 50 years ago when Nixon and Kissinger were the names in the news) may well generate news stories in the mainstream press in the next few weeks.

Could it be that Gold and oil won’t be priced in US Dollars?

I am not able to predict in any meaningful way out the macro-economic impact, because the ending of an agreement is not likely to have any instant impact in a world where all efforts, especially in China where they have been dumping Dollars in favour of mainly Gold, have failed to dislodge the Dollar as the world’s preferred currency.

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