“Let our advance worrying become advance thinking and planning” (Winston Churchill)
Due to holiday season, share trading during August are almost always at their lowest volumes. We now head into the final third of the year when volume increases again. The latter parts of the year normally produce the biggest gains, especially Q4, so lets see what happens. The rather benign trading volumes were reflected in the August performances…that said, predominantly positive month again with the US / Global players you know I like to focus on coming out on top…..the raw data:
Dow Jones +0.3% +11.1%
Nasdaq +1.3% +19.4%
FTSE +0.8% +4.0%
DAX -0.5% +5.0%
Nikkei -1.4% +3.1%
SSE +2.5% +8.7%
And on the currencies, we saw the Euro breach the 1.20 mark albeit briefly. I would perhaps suggest the US dollar’s decline this year is coming to an end and especially if you have Euros, purchasing some good old greenbacks would be a wise move
British pound still has to be cheap for the longer term, as long as you can close your eyes and not worry about the volatility which will be caused by the ongoing negotiations surrounding Brexit..so the US dollar’s performance against other currencies:
GBP +1.9% -4.8%
EUR -0.7% -13.2%
JPY -0.2% -0.5%
CNY -1.9% -5.0%
AUD +0.2% -10.2%
North Korea has been in the press a lot, with clients often seeing this as a worrying situation for their portfolios. There are questions as to whether to buy “safe havens” such as gold. Those of you who know me will know the answer to that question, those who don’t it’s No.
Whilst we need to be conscious of not belittling the potential threat, this posturing from this Pariah State is nothing new, with both Un’s father and grandfather making threats which have largely come to nothing. Of course we want to see conflict avoided but when we look back at other far more serious geopolitical events, it hasn’t been necessarily been doom and gloom for your investments.
On 1 September 1939, Hitler invaded Poland, the start of World War 2. The Dow Jones’ first day of trading after (5 September) saw an increase of 10% .
When the Japanese bombed Pearl Harbour, the markets fell just 2.9% and these losses were recuperated within a month. In fact during World War 2, a Dow tracker would have made you a 50% return.
In 1962, there was the Cuban Missile crisis. Many believe to be the closest threat we have had of nuclear war, certainly more so than Un’s current threat. The Dow Jones fell 1.2% during the 10 day crisis from 16 October – 28 October, for the year there were gains of 10%
Even after 9/11 in 2001, whilst the country was in a recession, the 15% of losses suffered once trading resumed through panic selling where all made back within two months.
No one can predict what will happen next when it comes to these scenarios. Short term volatility can exist but buying good companies with good products in well managed funds is the key to obtaining the long term capital growth. Running off to a so called safe haven every time a worrying situation occurs is not the answer, Gold would have lost you 22.2% had you been invested there for the last five years. Compare that to two of my favourite managers, Terry Smith and Nick Train who woudl have made you a handsome 171% and 156% respectively.
Whatever happens in North Korea, Syria, Libya isn’t going to stop us showering using Dove Shampoo, washing our clothes with Persil washing powder and enjoying the odd Magnum ice cream (all Unilever brands and Nick Train’s largest holding)
Old cliche I know but “Life does go on”………