Its Not Harry

Comment and opinion for retail investors in the UK

Markets

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!

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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 – a pinch and a punch on the first of the month

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As we used to say when I was a small boy, back in another century when politicians who slept with ‘models’ resigned and stayed out of public life. Those gentler times when Russian apologists in English public life without any democratic mandate were not credited with being important enough to make public assessments of the US Justice system just because their favorite American pop idol had been found guilty of behaviour that was totally in character.

I actually mention the date because today being June 1st means we have ended May – that May of the ‘sell in May and go away’ variety.

Is this one of those years when profits ought now to have been safely banked? Of course, we can only know with hindsight in a few months’ time, but I would draw your attention to this extract from my trade press:

This focuses on only a narrow part of global equity markets, but it is the segment where most money has been made recently.

Thus the ‘sell in May’ mantra could well be applicable to some of your assets, but others may still be very fairly valued or even cheap.

My personal modus operandi is to take good profits as soon as they arise because I need money to spend from my portfolio. You may have different objectives, but there is always the risk of a ‘reversion to mean’ and the more stretched the valuation of an asset is relative to its long term ‘fair value’ average, the more painful the ‘ping’ back will be.

As it is the start of the month, I have also prepared a Deep Dive article and that will be finally edited and posted next week.

YAP – a geographical shift?

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Readers will know that serious investors do not shift their asset allocations around and trade in and out of funds frequently just because of a change in short term factors. In my training I suggest having a high level asset allocation target for each main investment sector that is of interest and relevant to your objectives and to then monitor, using some sort of recording system, how your actual portfolio compares with the targets.

This is not a strict science, but part of the ongoing process of diversification and risk control.

Something I have noted from the mass flow of media data that I see

I remind you of this because I want to call your attention to what I see as being subtle changes in the thinking of the professional investment community on the relative value of North American versus European and UK markets.

I am not suggesting that you are likely to react by making major changes to your asset mix, but that you might find this helpful context in making those minor course corrections that keep the portfolio supertanker heading smoothly for its long term destination.

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YAP – bad news, or not?

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You will likely have noticed that the news on inflation is less positive than wished for by central banks and markets have modified their assumptions on when interest rates will start coming down. This has been reflected with direct impact for those renewing fixed rate mortgage contracts as at least in the UK, rates have actually gone up slightly.

So, is that just simply bad news?

It is certainly not good news for bonds and the FT headline today that the climate for fixed income investing is ‘unsettling’ is a good way of describing the situation.

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