Its Not Harry

Comment and opinion for retail investors in the UK

Mark Potter

Watching Brief – January 2024

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Happy New Year!

I promised a look back on 2023 and some pointers on what to look out for in 2024, with just a smattering of predictions for the coming year.  Let’s do it!

2023

I spotted that the FT ran a headline on December 31st along the lines of 2023 being the best year for markets since 2019. As 2020 was something of a special year due to the pandemic and the end of 2021 was the collapse of the long, fantasy driven, free money, bull market, that is not a hugely inspiring claim.  2022 saw the realization that fixed income stocks and growth equity discounts had been based on a wildly optimistic bet that interest rates would stay low for ever, so was an equally gloomy year (but one that many had seen coming).

Forwards into a new dawn?

2023 was in fact at the start very much a continuation of 2022, with an expected recovery in fixed income (bond) valuations deferred longer than many (including me) anticipated as central banks dramatized their heroic role in battling inflation with ‘higher for longer’ interest rates.  It was only in late October that markets collectively decided not to believe that rates were going to stay up much longer and a new, and I think permanent, upward trend in valuations commenced.

If interest rates were the main driver of 2023 markets as a whole, then a whole raft of economic problems in China, or more exactly the very negative perception of Western investors about China as a place to invest, meant that a place where you would have wanted to lower your asset mix exposure in 2023 was China and by implication, many Asia Pacific and Emerging Market funds where the managers were still sticking to heavy fund weightings in the main China and Hong Kong stock markets.

A place where I thought investors ought to be confident bumping up their asset allocations was the unloved UK.  Some funds with careful stock picking have already offered very solid returns from portfolios of mostly UK shares and I think this is just the start of a new phase when global money flows into UK companies with secure profits and ridiculously low P/E ratios.  A recovery in technology shares was kicked off by almost irrational enthusiasm for everything you could stick an AI badge on.

So we have arrived, for better or worse as always at the start of a new year.

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Midweek Musings – Seasons Greetings!

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It looks we may be in for a rather late Santa Claus rally in the UK market with better than expected inflation numbers just published.

I was amused to see someone in government or the Bank of England saying that workers would need to accept lower pay rises before the central bank interest rate would come down. With many fixed rate mortgages at low rates coming to an end now, I can imagine many a home owner adopting the mirror position and unions also saying that as long as interest rates remain high, workers need large pay rises!

The sharper than expected drop in inflation without a large rise in umemployment, which is what is also happening in other major economies, further confirms that the bout of infaltion which is now tailing off was driven by supply side factors and central banks are likely to cause uneccesary recessions if they don’t take their foot of the brake and start a little stimulus before long.

Maybe the markets are here with our 2023 presents?

Markets, I suspect, do not believe that the hawks on central banks committees are any more in the majority, so are anticipating rate cuts in 2024. The risk to equities is in fact the aforementioned potential recessions.

Fixed income assets are for that reason useful insurance at the moment – in fact something of a one-way bet.

My January monthly briefing will be the next publication from me, when I will look back briefly on 2023 and do some crystal ball gazing for 2024, like a true Janus.

Until then, I wish all my readers a peaceful, healthy and happy fortnight over the holiday season. And a nice fat portfolio valuation for December 31st!

Midweek Musings – New direction?

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As I have repeated ‘ad nauseum’ the likely direction of both equity and fixed income valuations has for many months depended only only one factor: what markets though would be the next central bank move on interest rates.

Different market segments have reacted in slightly different ways, such as short dated bonds doing better than long dated when rate rises were frequent, but really the alleged ‘fight against inflation’ has been the only news you needed to follow.

I think that will change in 2024.

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Watching Brief – December 2023

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Pottering About

Last year, I wrote a traditional ‘review of the year’ piece in December.  I am thinking this year that it would be premature, as how December turns out will likely be the way we remember 2023, which has been very bumpy for investors, especially this Autumn.  So, I will likely write about what lessons we can draw from 2023 next month, using my conclusions to take an astrologers look into 2024!

For this post, I will instead draw your attention to a few topics that I hope will be salient and assist you in your portfolio assessments.

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Midweek Musing – over to Jeremy

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When I was a teenager, the social environment in the ancient all boys grammar school that I attended was not much progressed from Victorian times and bullying was just part of the rough and tumble (and it was rough and there was tumbling). One boy who was mildly picked on had what was then thought to be a serious misfortune – his given name was Jeremy. He would have been marginally better of being called Nigel or Brian in that school in the 1970s.

It occurs to me that there are quite a few Jeremies (is that the correct plural) of a certain age in the public eye today and none of them are universally loved: Clarkson, Corbyn, Vine and Hunt came to mind. Then Beadle and Thorpe came back to me, with a prompt from Wikipedia.

As the name is rooted in Jeremiah, the Hebrew prophet whom I have used before in articles opining about unreliable short term predictions, perhaps there is something mystically negative about the name.

I know that in truth there will be many happy and successful Jeremies. Maybe Irons?

I direct your attention to the name because I have nothing to say about investment markets this week.

You are very welcome to devote the time freed up from reading my pontifications to working out what Jeremy Richard Streynsham Hunt MP has to offer you by way of changes in the UK tax system and prospects for the English economy.