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The Stroke of a Pen

“the pen is mightier than the sword”

was first used by English author Edward Bulwer-Lytton in 1839.

It seems 186 years later, the phrase still rings true. We have entered a period of extreme uncertainty for all global citizens, governments and of course for us investors. This week will surely be as gut-wrenching as the last.

Many powers around the world, China, Russia, Iran and of course the EU had become committed to the idea that the US was not the Superpower it once was. It could be challenged and nibbled at continually, without provoking a response. Three terms of Obama in power, (no, I don’t believe I’ve made an incorrect statement here) have lead to much of the world believing Uncle Sam is a spent force. With the stroke of a pen, actually with very many strokes of the pen, Trump has unleashed the only bargaining tool he holds – the keys to the US consumers spending habits.

Bombastic, Bully, Stupid, Oligarch, Orangeman, Criminal, Failed Businessman. All probably true of the man to some extent, but of one thing we can be sure, he has huge Cahoonas and follows through on his campaign promises.

I have pretty much devoured every quality article written so far to try to understand the rationale, but more importantly to plot our course once again, now the wind has swung through a full 180 degrees. So far the best reasoning has come from Eoin Treacy, who is a member of our own investment committee. He writes….

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Market Corrections

There have been 27 market corrections since 1974. There’s no universally accepted definition of a correction, but most people consider a correction to have occurred when a major stock index, such as the S&P 500® Index or Dow Jones Industrial Average, declines by more than 10% but less than 20% from its most recent peak. It’s called a correction because historically the drop often “corrects” and returns prices to their longer-term trend. 

Even understanding that corrections do occur regularly, often doesn’t help investors with a propensity to worry to handle these setbacks. Every significant reversal from an upward trend feels like a punch to the stomach.

Regular market setbacks are a function of the system, not a glitch. Without smaller setbacks along the way, you can be sure a much larger crash will follow at some point. Usually all the factors that lead to a change in investment sentiment were already in place and accepted, until one day those same factors are perceived as unacceptable. Still we need to learn from these episodes and endeavour to understand why market confidence suddenly evaporates. I continue to read extensively and believe that one of my go to sources of information succinctly describes why the markets have been so upset, so quickly. 

Trump

On an obvious level the upset market is all down to Trump’s actions, but probably not for the reason the mainstream media has suggested. In most of the “quality” US financial press channels, Donald Trump, Elon Musk & Co are deplorables. Stirring hatred through clickbait grabs attention, accumulates viewers and readers, which brings in advertising revenue. So don’t expect a balanced view anytime soon from presenters and journalists schooled in never wasting an opportunity to present regular occurrences as complete crises. However don’t forget a large minority of the population of the US didn’t vote Republican and want to see him fail, many traders on Wall Street included. 

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38 Years and Counting

This month I celebrate 38 years since the beginning of my career. In the beginning it was purely a sales job. Armed with a suit and a rate book, I was unleashed on the great British public to spread the gospel according to Abbey Life. I was taught to sell savings plans and life assurance plans. With a little further training and an additional rate book my sales repertoire extended to “personal retirement plans” the fore-runner to personal pensions which arrived in 1988. And so it was for 10 years.

I’m proud to say that some of those initial clients are still with me today. Thank you;

Rory, Ruth, Mo, Stuart, Joan, Ruth, Dek, Janet, Tony, Robert, Belinda, John, Roy, Kim, Brian, Julie, Ken, Geri, John, Chris, Diane, John, Philip, Graeme, Wendy, John & Andy.

I lost my insurance company religion when I realised that Abbey Life was making more money than the policyholders were and became an Independent Financial Adviser in 1997. If you want to read the full career backstory you can read it here.

Privatisations.

When I joined Abbey Life, Margaret Thatcher was our Prime Minister. She was re-elected with a manifesto to sell off state owned monopolies. She dreamed of turning ordinary citizens into an army of private shareholders. Thatcher vowed no industry should remain in private ownership. Do you remember the TV advertisements to, “Tell Sid” that British Gas was to be privatised?

Those privatisations left a lasting impression on me. I managed to invest £100 here and £100 there and made a profit in the short term. I couldn’t hold on to those shares for the long term unfortunately as there were mortgages to be paid, and children to be brought up. I’ve no regrets, but……

A little recent research revealed that if you invested £1000 in British Gas on flotation –” in 2023 you would now have £40,600, of which £24,400 is due to dividends being reinvested to buy more British Gas shares”.

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