I wasn’t a terrible child, but I do recall my mother, when pushed to the limit, would always shout “Get up those stairs”. It meant that I was really in trouble and was certainly in for it when my father got home. Currently I’m not afraid of the phrase, during our FaceTime meetings we say it in encouragement when Lucas and I study the charts of the major indices. The stairs are our comfort blanket, but they are hopefully our early warning system.
Up the escalator but down the elevator
Very American I know. We would say up the stairs but down in the lift. That’s how the markets were explained to me. Stock-markets shouldn’t rise like a lift. If they do, the likelihood is that the rapid climb precedes a spectacular plummet. Rises should be gradual, building support at each stage of the way. They should climb the “wall of worry”. When everybody is afraid, it usually means there is no chance a bubble is forming.
BC (Before Corona) things were looking good. They weren’t climbing like a jet fighter, they were looking steady. Solid. But then panic struck. AD (After the drop) we had fits and starts to begin with, but at the moment the gradual upward progression is quite reassuring.
Here’s the FTSE 250 Index
As you can see, down the elevator and currently climbing up the escalator
Here’s the FTSE 100 index
Here’s our Moderate Portfolio
By comparison here is how our Moderate portfolio has performed over the same period.
- Our Cautious portfolio is down 6%
- Our Moderate portfolio is down just 8.14%
- Our Aggressive portfolio is down 11.98% from the peak.
- Whereas if we simply invested in index-trackers, the FTSE 100 is down 17.85%.
- The FTSE 250 is 21.76% down.
To these eyes that have studied thousands of charts, they are currently suggesting a flattening out is occurring. A pause for breath is OK, normal even. But soon we will be looking out for a pickup. If it doesn’t become apparent, we may need to be taking action.
Is it looking bad?
We think the markets are performing as well as can be expected at the moment and there are at least three reasons beyond Coronavirus causing the flattening out. If the markets were doing any better we should be worried.
- The curse of the last 5 years that is the uncertainty of Brexit. Markets hate uncertainty. Our transition period ends in just 6 months time.
- In the UK the self-employed pay their income tax on 31st January and again on 31st July. Currently the next payment is deferred until next January. In the US they pay quarterly. March was deferred but becomes due along with this quarters payment on 15th July. Many Americans and US Corporations will have sold down investments to make that cash ready.
- The Americans go to the polls on 3rd November to vote to keep Donald Trump or to ditch him. As we approach markets could get a little flat awaiting the outcome.
Although we in the UK take little notice of the US elections, what happens over the other side of the pond tends to move the worlds investment needles further than what happens over here or over the channel. The good news is that neither Trump or Biden is seen as particularly bad for Wall Street. In fact one of the largest single day climbs occurred not because there was some great news on the Covid-19 front, but because Bernie Saunders admitted defeat. The US market rose by 5% and much of the world followed higher too. Bernie was to Wall Street what Jeremy was to the FTSE 100 index. They were seen as years of trouble.
Bad news can shock us. It can make individuals panic and herds stampede. But then we become numb to it. To shock us more, things can’t just remain looking bad, they have to get even worse. You see, we take things for granted. The fabulous things in life become the norm and if the news remains bad it just becomes the same old same old.
From a whisper to a scream
If you deliberately look for bad news you can find it in spades. Look no further than the BBC. But if you deliberately look for good news, it can be found out there.
- We are not all going to die. Obvious but now the majority of the world believes this.
- Herd immunity could be reached with as little as 20% of the population infected. It’s predicted that around 20% of the population has been infected.
- The current spikes in case numbers are not translating to more deaths as many who are infected now are amongst the young, who were always more likely to “jump bail” first.
- There are more empty hospital beds across many countries now, than there were before the outbreak of the global pandemic.
- The last of the UK’s coal fired power stations have not been needed for over two months.
- The top of Mount Everest can be seen regularly.
- UK bank accounts ended May £16 billion higher than they started. Wow!
- Nicola Sturgeon has managed to keep her hair beautifully quaffed. How!
Same as it ever was
We remain vigilant. We watch. We read. We listen.
Stay Alert. Stay in the markets. Don’t go out (unless support is broken)
Don’t Panic, But if you need to panic, panic early. 😂