Midweek Musings (plus Hit or Myth)

Some confidence but not universal

We are now far enough into 2023 to get some idea of the market mood. It always takes a couple of weeks to see if the big players are pessimistic, raising cash and not adding to equity holdings, or nervous about missing out on a first half pick up in equity valuations and thereby blowing their bonus prospects.

This year, although there are many high profile commentators, including Terry Smith of Fundsmith, predicting a poor 2023 for a variety of reasons which are not all factual, I think that the fear of not being in the market is more powerful than a preference for cash with seriously negative real rates of return.

A curiosity has been a jump in the price of gold. I guess that this might be because it has become the next most interesting thing to speculate in for those mainly younger players who are now disillusioned with crypto.

It is still very early in the year and of course one cannot predict the impact of major events, some of which we will be surprised by, but I am at the moment feeling optimistic about equities and bonds, very negative about real estate, both commercial and residential,and generally pleased that equity markets are priced on more normal measures after a couple of years of folly.

I will comment on fixed income funds shortly as a number of my readers have been doing useful research into what you can find by way of funds in that asset class and after a period of owning not a single bond fund, I am moving some money into fixed income

Now I want to offer the second, late, part of my normal monthly output.

Hit or Myth

This time the claim is: Past performance is not a guide to the future

I can imagine you are thinking that this is a bit of a waste of time – regulators make sure you get told the above every time you buy any investment and I myself am always warning people off of using performance alone to pick funds or review recent portfolio performance.

So this is a hit – it must be true, surely?

In fact, if you apply an intelligent interpretation to the exact statement, it is in many ways a myth.

By one must qualify that contradiction by saying that past performance, when understood and used to understand a current valuation, may very often be a useful guide to the future.