Monday mashup – parking your money

Gloom for epidemiologists but booming stock markets

I know some people don’t pay too much attention to the global Covid-19 case numbers but I suspect everyone is aware that the total number of daily new cases continues to rise and the rate has been accelerating for some weeks. I suppose my readers will be aware of the ongoing lack of progress in holding back case numbers because of the news over the weekend about trips to Spain.

I start with this gloomy comment because it is the main context against which we have to judge stock market valuations which have recovered back to and even ahead of pre-Covid levels in some sectors.

Whilst there is some good news on vaccines and therapeutic medicine with Professor Holgate (and colleagues) in Southampton, whose work on hay-fever and allergies was gospel to me in the 1980s having been in the news with his later work on beta-interferon, such science will not bring results in the next few weeks, perhaps not even this year.

Now as the medical news, being very bad in the short term, is disconnected with the recent stock market trends, one can have a short term tactical approach. As I have said before, one can ‘make hay while the sun shines’ even if you can see the tornado in the distance.

But if you see a decent return, say 10% to 15% over a few weeks or months on a well chosen fund and you decide to take the gain, where do you put the money? This is the question that I have been thinking about recently.

Where to park gains?

One has various choices of defensive assets: cash (no return worth talking about), fixed income (incredibly expensive at the moment and credit risk rising), absolute return and macro or market neutral funds (most of which appear not to have worked in the recent past) and gold (already up in value with a good tailwind of investor support). That is a good short list but there is no stand out ‘best’ option.

I have been happy to invest in physical gold for some months for multiple reasons that I have explained in other posts (call or mail me if you are a subscriber and want clarification).

Although the majority of defensive funds, like absolute return, macro strategy and simple cautious multi asset, don’t offer that much protection in a systemic crash, some managers do seem to have developed the right timing skills.

I have invested in the JP Morgan Global Macro Opportunities fund for some years and it has done what it promised, although a little erratically.

I recently identified during research with a subscriber the BlackRock European Absolute Alpha fund. This seems to have benefited from some great timing decisions in the fixed income market by the managers at the start of the year.

These are examples of funds that would have protected you well in March this year, but that is not of course any guarantee that they will work next time! If you use them as examples, you can no doubt find alternatives that might meet your needs.

Investors need to form their own view of what suits their needs best when reserving money from gains. Some may spend it! Others may just hold funds on deposit and accept the trivial rates of interest. For those who like to get a return whatever and can afford some risk, gold and the best defensive funds are worth considering. Actually, I will be doing all of the above!