Wobbles in the States saw the Nasdaq lose 4% in one day – not much in one sense but the biggest one-day loss since October 2022, all the same. An 890 point drop on the Dow worried people too. Are these very dramatic changes a sign of negativity to come for the US?
Remember as well, most people will be affected by any upset in the major US stocks as they have them in their global funds, cheap passives, work-place pension arrangements and so it goes on so the impact of a reset in the US will have major ramifications for most investors. This is the ‘concentration risk’ which most people don’t want to talk about on the way up because it is a positively exciting journey… it’s very different on the way down. Since, some stability has returned but valuations remain fragile over there anyway.
However, we have been concentrating on value elsewhere so are relatively sanguine so far, I am pleased to report. Non-US markets have out-performed the US since the presidential election now, with the FTSE100 unflustered by the US at time of writing. Is it time to ‘buy on the dips’ in the US? Definitely not in our view…
So the Bank of England has decided not to cut interest rates again, despite more poor figures for economic ’growth’ (well, stagnation) and also more pessimistic projections going forwards, sadly mainly created by the Chancellor’s clumsy budget last autumn which has impacted sentiment dreadfully. Rates should be cut to stimulate the economy and cut costs especially for business but doing so is likely to see inflation rise more…
On inflation, price rises to cover the swingeing increases in employer’s National Insurance and a way-above inflation 6.7% increase in Minimum Wage haven’t even hit the figures yet, let alone the significant increases many businesses are also facing in Business Rates (as previous reliefs have been cut hard) – watch this space.
Unemployment and employment conditions generally are likely to be adversely affected, especially as the Chancellor is looking to cut-back public sector jobs meaningfully too and cut health benefits to encourage more to join the job market. Who could have imagined this from a Labour Government… Clearly the realities of being responsible have begun to hit home and have to take precedence over slushy and wholly unfunded socialist sentimentality which is easy when you’re not in government… I’m still not looking forward to the Spring Statement, however.
Unrelated to that… have you done all you need to do as the tax year-end fast approaches? That includes pension contributions, using Capital Gains Tax allowances and filling your market ISAs and being ready to repeat the exercise on 6 April too. I am pleased to say our clients seem pretty on the ball though there are bound to be gaps…
Investment Trusts v other collective investments (as held by most investors (but not our clients))!
An interesting article by the AIC shows the longer-term out-performance from Investment Trusts over their open-ended brethren.
There are some basic reasons for that and they will continue to exist going forward but it is curious how many advisers never use Investment Trusts at all – why? It makes absolutely no difference to us at all, other than if it is the best medium for the particular job for our client. If you want to know some of the reasons and why you should use them (and maybe why your adviser elsewhere doesn’t but it’s certainly not necessarily for your benefit)… then you know where to come!
Good news/bad news
More sad news that an eminently good commercial property Trust is undertaking a review and may enter a controlled wind-down through selling its assets and closing the Trust. The shares in Life Sciences REIT have been trading at a colossal discount to the underlying asset value of the commercial properties it owns. If they realise the values in the books, even at a discount, then shareholders will receive a significant premium to the latest share price.
The shares bounced 10% on the news and significantly higher than the recent trough. It’s one of the reasons we buy these sorts of things but the universe is contracting by the week. The ‘bonuses’ are there for free and don’t exist with other unitised holdings remember – just Investment Trusts and comparable quoted funds on the stock exchange.
Several alternative energy funds have also appeared to bounce usefully from their bottoms, just after the news that investments in ‘green funds’ have produced some rather awful results over the years, for their previously loyal investors who have instead been leaving them in droves
EU ESG funds face record outflows as investors shift to traditional markets – because of the cheap levels at which such assets are trading presently (but that’s why we have been buying the closed-ended versions so cheaply….). Curiously, almost 5,000 such ESG funds in Europe hold assets exposed to coal, gas and oil now and armaments are following for defence – even if not all will.
On the dull side, other companies report mixed results – eg Vanquis Bank slipping 12% on poorer results than expected despite the turnaround progressing but since rebounding.
Tax good news for traders?
A surprise announcement means that someone with a trading turnover of less than £3,000pa won’t have to report it but that doesn’t necessarily mean avoiding tax on it (which still only applies to less than £1,000 turnovers). This could be someone trading on eBay to running a dog-walking business or gardening but frankly, it’s becoming worth everyone having some form of ‘business’ to enjoy this tax-free income! What can you do!
Details are yet to be received and reviewed to check the small print… Apparently 300,000 people will then be relieved from completing a tax form generally – hopefully that will include those with dividends and interest too… This may not arrive till 2029 so for now, stick to the £1,000 limit!
Crypto currency
After the latest hype as Donald Trump suggested a national crypto reserve may be a sound idea, speculators have been leaving Bitcoin and all its ‘friends’ in large numbers. As a sage noted, how can an ‘asset’ which drops by almost a quarter in a matter of weeks ever be considered a stable reserve asset or ‘currency’? Well, it can’t. I am not even going to talk about the ’Meme Coins’ like the Trump ones which gamblers pushed really high and since have pushed all the way down again.
We then hear of the $1.5billion of ‘coins’ stolen by the North Koreans and in reality ‘untraceable’ as the roots of opacity and crime rear their heads again. The afflicted crypto exchange will cover customers’ losses but the ease with which such things can still happen doesn’t give much confidence that the leopard has changed its spots… if you are a criminal, the dark web and crypto currencies continue to be where you hide and not to be traced.
Sustainability rules
The FCA has adjudged that adding armaments’ companies to ethical portfolios doesn’t break its rules. In fact it says it doesn’t have any rules about what sustainable investments look like at all, in that it is up to the managers and investors to choose. It simply wants to:- ‘prevent firms making unsubstantiated claims about the sustainability of their investments’.
‘[SDR] does not prescribe which activities or investments are sustainable, nor does it prevent investments in certain sectors, including defence,’ it said.
Name and shame
The Regulator announced plans to name and shame those in the world of financial services and advice whom it accused (from its interpretation of misdemeanours), even though its own records to date noted that almost half of past such ‘enquiries’ ended with no actions being taken.
The Treasury Committee (let alone the City and trade bodies) noted that this proposal was inequitable – firms (and individuals) effectively being found guilty and thus having bad publicity to impact their businesses negatively and potentially cause customer harm before then being proven innocent after what could be years later and well after the damage has been done. The FCA continued to kick-back suggesting that was in the public interest. However, it now seems to have had final thoughts that it will not change its present status.
It seems the business and confidence impact that such published accusations would have had against the target entity, despite ultimately no action ensuing, was not a concern to the Regulator and that was despite effectively no independent appeals’ process being available to the accused nor the degree of regulatory accountability challengeable first.
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers
