Its Not Harry

Comment and opinion for retail investors in the UK

Monthly commentary

Deep Dive – April 2024

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To kick off this new series of articles, I am going to express some opinions that are not rooted in traditional book learning or any specific academic research or publications, but my own observations of what actually happens in equity markets, taken over the last 4 decades and mixed in with my personal rather eclectic reading about human behaviour in the context of decision making – not specifically related to financial decisions.

You might call this ‘behavioural insights in equity market valuations’ but I suspect that is rather too grandiose!

NotHarry says….

The main points

I will be exploring 4 less obvious ways in which market valuations are created and sustained (or not):

  • Possible ‘invisible’ supply side variations and/or sudden excess demand

  • The ‘the majority view is safest’ syndrome

  • The Government interference problem

  • The ice break risk

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YAP – how about Wellingtons?

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I hear it’s been a very wet Winter in the UK, so no doubt you have needed your rubber boots when out walking. Here the water tends to come down ready frozen from Decemeber to February!

I am actually posting this note to highlight a fund, something I rarely do because of the risk that readers will take my comments as a recommendation and I don’t ever offer personalised fund selection advice because I have no authority to do that.

However, one of my subscribers asked my what I knew about Wellington Asset Management not long ago, because he had spotted their Global Stewards Fund in the Interactive Investor Ace 40 pick list. This fund is I think likely to interest many of my subscribers who like to invest sustainably without sacrificing above average returns. So this post is a ‘heads up’ on that subject.

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The Magnificent 7 ride again – but how many sequels can we expect?

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The table which will download if you click the link below demonstrates well how shares in the mega sized tech firms (branded the Magnificent 7 after possible acronyms got to be absurd and named in the downloaded document) have generated most of the main US market returns in 2023, and for those of us with funds that have a specific thematic bias, some excellent results too.

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Midweek Musings – markets will be markets

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At times I am reminded of how utterly stupid, even blind to reality, stock market participants can seem to be and how that can have a short term impact on valuations.

Today (Tuesday 13th February) US inflation figures came in a little higher than expected, resulting in an instant sharp sell off as markets worry about delays before interest rates start to come down. In itself this is no surprise, but it is not a useful indicator of what is really happening.

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Watching Brief – February 2024

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Geo-political scariness

Assessing the likely direction of stock markets always requires a multi-faceted approach.  One needs to be aware of the main macro economic trends within each major geographical region (broadly North America, Europe, the UK, the Asia Pacific region and Japan). 

Things like GDP growth levels, interest rates set by central banks and consumer and producer optimism indices will always get a mention in analysts’ and strategists’ presentations, and as context and drivers of market mood, these are important.

However, economics is an inexact ‘science’ and that sort of data is only useful to the extent that it becomes accepted wisdom and will drive market behaviour.  For example, a general consensus (which is the best you are ever going to get) that interest rates are going to come down will result in changes in the bond yield curve and that will have an impact on valuations.  If rates do not come down after a long wait, then the consensus will change and that will have some sort of impact.  This is just an example of a ‘macro’ factor impacting valuations and feeding into asset allocation decisions.

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Midweek musings – some signs of market direction

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We are now far enough into January to have absorbed enough data and commentary to get a feel for how market participants are expecting 2024 to turn out for the year. In a word, as they say in Lithuanian (implying a few), the mood is nervously optimistic.

Going into a little more detail, here are some pointers for you from the first 3 weeks of 2024. As the year progresses, I will keep you alerted to new data that will help you with asset allocation decisions, profit taking and risk control. As always, you can ask me specific questions or comment if you are a subscriber.

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