July 2014 Investment Review

How am I doing?

This quarter the FTSE100 has staged a mini comeback. The index finishing 170 points or just over 2.5% higher. It began the period at 6,695 points and climbed to end the quarter at 6,866 points. Last quarter the index had fallen by 0.9%. But let’s not forget the FTSE100 had already reached 6,836 points by 20th January, so its fair to say the main London market is trading flat and sideways. The tension in Ukraine which dominated the news at the end of the first quarter has ceased to be news and the Middle East unrest and its knock on effect on the price of oil has taken over. But whoever is in power in Iraq will need to sell their oil to the world to survive. Once again it seems the US has no appetite for any further conflict.

The last three years have been marked by a strategy of “Sell in May and go away” This year I haven’t done that, although I have lightened equity exposure when 6800 points has been exceeded. In April I said
“We don’t have a crystal ball but we are within a few months of the time of year when traditionally markets tend to slow down. I hope they don’t this year as they have not really got going yet.” I’m glad I hung on and caught some more growth.

What have you been doing?

Well recently I have been wondering why it was “Oh so quiet”. It has been feeling like an old Western film where the red indians have ceased their drumming and dancing. The word in the fort was to be prepared for attack. Or was it the scene from Zulu, you know just before everyone got slaughtered. Anyway I’m not so keen now, hence the build up of cash waiting for the next opportunity. But when it will be here I don’t know.

So what next for markets?

Take a look at the VIX – commonly known as the fear indicator – flat as a proverbial blast of flatulence.

Screen Shot 2014-07-04 at 14.55.22

It’s not been this low since 2007. The expectation is steady waters for some time to come. From the chart you can clearly see the spikes around the time of the Lehmanns collapse, and the two threats to the Euro as an economic region and as a currency. But for now there is the expectation of nothing. It is causing investors to be complacent, they have short memories. The belief held once again is that shares can only go up. We will probably see 7000 points for the FTSE100 this year at this rate. But I’m uncomfortable. I don’t like it. I’m watching and waiting.

When is the next update?

These updates are quarterly so we will write again in early October.