Anyone who picked up any accountancy training in the course of their working life may have come across the idea of ‘overtrading’. It is explained something like this:
Markets
Watching Brief – December 2021
Pottering About
I often cross check what I have written in the past about economics and markets, partly to see how my looking into the future has inevitably been exposed as frequently ‘off beam’ (this tends to keep my current writing away from the wildest of speculations!) but more to assess what surprises or new trends have emerged and the more common reality: over many periods how little changes in 12 months.
Midweek Musings – quickies
After a longer technical post last week, this week I am going to confine myself to cherry picking a few news items that are relevant for investors who are considering portfolio asset mix balance and possible transactions, like profit taking.
Markets certainly seem edgy at the moment and the odds of a Santa Rally are receding. I suspect that institutional traders are looking to book some gains after a good year, perhaps nervous about the worsening Covid situation in much of Europe.
Midweek musings – I hope you were paying attention
A piece in today’s FT refers to investors suffering the 60/40 blues. It comments that the expected diversification benefit of adding a large chunk of fixed income securities to an equity portfolio just did not work in September and 60/40 porfolio investors suffered from both an equity sell off and rapidly rising gilt yields.
There is more of that today as the market focuses on rising energy prices. It would be a surprise, but not improbable, if the much anticipated end of cycle market sell off was driven by oil and gas prices. People of my age were used to talking about the energy crisis constantly in that late 70s (I had my moped fuel ration book in 1973/4) and we note the re-emergence of those two little words in media coverage.
As I have pointed out before, an increase in bond yields of 1% is not too dramatic if the rise is from 10%, but a rise from 0.5% to 2% is very dramatic for longer maturities. We are now witnessing the process live.
I have been writing for quite a while that owning a general mix of fixed income securities was not necessarily going to be useful in the next part of the global economic cycle. Some bond fund managers (tactical or speciality funds come to mind) may well still be able to offer some volatility control and even make a little money, but index trackers heavy on long dated gilts and US treasuries are going see their performance hammered.
Watching Brief – October 2021
Pottering About
Last month I wrote that this was often the time of year for bumpy markets and I was not wrong for 2021.
Issues that are potential headwinds and which have blown up somewhat more briskly in the last few weeks include:
Midweeek Musings – we’re all doomed
As Private Fraser used to tell Captain Mainwaring…
I read another piece from Noriel Roubini, the academic economist who shares Fraser’s positive oulook, within a few hours of a news item that explained how the UK government had to cover much larger interest payments due to a change in gilt yields. These 2 items fit together.