"Prediction is difficult, especially when it involves the future" (Mark Twain)
So after a tremendous start to 2019, we had an adjustment across the board in May, perhaps a little more severe than anticipated although around half of those losses came during the last week.
Raw Data being...
MSCI World -6.1% +15.6%
S&P 500 -6.6% +17.5%
FTSE -3.5% +6.4%
Nikkei -7.4% +2.9%
SSE -5.8% +16.2%
MSCI EM -10.5% +4.4%
On the currencies, it was a strong month for the US Dollar, with gains across all major currencies with the exception of the Japanese Yen. Sterling had a tough month, with the political announcement that Theresa May was stepping down as conservative leader / Prime Minister giving the currency traders something to manipulate (despite it being on the cards for some time).
GBP +3.1% +0.9%
EUR +0.7% +3.0%
JPY -2.9% -1.2%
AUD +1.7% +1.5%
CNY +2.5% 0.4%
You may hear some Dinosaurs quoting the old saying about stock market investing in that you should "Go away in May and come back on St Leger's Day"
No doubt using the fall in the last month to vindicate this out dated theory. Looking at stock markets over the last fifty years, it is remarkable that 96% of gains have come from the months of November to April but only 4% have come from May to October. However looking at the last five years this gains have been split far more equally with 43% coming in the summer months (northern Hemisphere) and 57% coming in winter.
The world and the stock markets are of course very different places now to what they were 50 years ago so using seasonal cycles as an investment strategy in today's world is futile. Picking the time of year to invest is the same as making predictions and those of you who read regularly know my view on that.
Predicting market highs, market lows, when to buy and when to sell is not something that anyone is capable of doing accurately. Market analysts work hard on forecasting and of course your investments need to be assessed from time to time and views taken. I took quite a bit off my client portfolios at the end of April, not because I was predicting that May was going to be a particularly bad month, but simply because it was the sensible thing to do as there were good gains to lock in.
When you buy, when you sell is a bespoke individual decision based on many factors, not least the life cycle of your portfolio and where you are in that. Stock markets are volatile, we all know this and in this current era where we have the most volatile personality of any US President before, this will be highlighted. Friday being an example when Trump's announcement for the tariff on Mexican imports was both unpredictable and caused a hefty market reaction.
There is though always a "good home" for your monies when you do trim equity gains as would have been a good idea in April. Diversification is key and where the opportunity may not seem right in equities - bonds, derivatives, hedge funds and many other vehicles offer you the option to continue to make money even in a downward turn
But even in the equity space there were some shining lights last month. The Lindsell Train Global Equity Fund - probably my favourite Global Equity fund still made a 1.8% return versus a benchmark MSCI Global of -6.1% ( This same fund that was up a whopping 11.1% in 2018 when Global Equities were down) So what is their "secret". They buy good companies with good products that sell to a growing number of consumers. Around 15% of this fund is invested Unilever and Diageo. Tomorrow more Magnum ice creams and bottles of Johnnie Walker will be sold than yesterday...
Using information to make informed decisions on what areas will be successful and what areas less so is the way to obtain consistent capital growth despite fluctuations as we have just had. Not predicting which is a complete waster o money...just ask anyone who had a bet on Anthony Joshua last night......
As always feel free to get in touch to disuss further....