Mellon on the Markets - December 2019
All articles in this section are provided courtesy of Master Investor Magazine and are not necessarily the views of Alan Steel Asset Management.
Well, December was quite a month. And a good one.
The UK election went as forecast – and amazingly William Hill was offering ‘free money’ on the results, albeit in small quantities, right up to 2am, by when it was evident to anyone that there would be a Conservative landslide.
It is good that the air has been let out of the tyres on the Brexit issue, with even old stalwarts such as Michael Heseltine giving up on the Remain fight. My own sense is that the UK will do just fine, and that there will be a boom in 2020, eclipsing almost every other European economy.
Of course, the commentators are now talking about the difficulties of concluding a trade deal with the EU, but since the UK and the EU are in perfect regulatory and trade alignment right now, how difficult will a deal actually be?
Not so much, I believe, as Europe, to requote myself from a year or so ago, has a lot more to lose in trade terms than we do. The only reason that the EU hasn’t fallen into outright recession is because of the buoying effect of the large trade surplus with the UK. Simples. They need us and we will get something done. ……
…… The New Year period is a good one to reflect on portfolios – and as hard as possible.
In general terms, I think we should all be interested in meta thematic investment (eg clean meat, longevity and climate change) and tuck relevant investments away for the long term. In the medium term, I think it will be value destructive to carry on in the old way. Recognise that yields are going to tick up globally (note that the Swedish central Bank recently raised rates – and this will be the future norm) and that inflation is going to do the same. ……
…… I am writing this in a café in Ibiza, which is an island that literally seems to hibernate in the winter, so I was lucky to find this one open. We had some unwanted excitement last night as two of our dogs went missing for 13 hours, without their trackers, which meant we spent a sleepless night hoping that they would return – and avoid traffic and accidents.
They did, but it reminded me of the chaos that can sometimes blindside us as investors. However, despite occasional entropy, things generally resolve themselves (a very good and consistent observation of my wise good friend Alan Steel).
And this is how I expect it will be this next year, with the chaos taking place in a collapse in bond prices, a fall in the US dollar against most other currencies, a very sharp rise in precious metal prices and a growing recognition that the major tech giants have probably seen their best days. ……
…… I am super-optimistic for us next year, and have been following my own advice (which I don’t always do). I really hope that some of you do too – as there will be no better sight than beaming faces and happy friends at the Master Investor show in London next March.