Back in March I thought that the prospect of my portfolio reaching new highs again within three months was outside the realms of possibility. This resilience in the face of a very severe economic contraction likely has something to do with expansionary government policies, in particular the huge injections of liquidity into financial markets by central banks. But has this really ‘solved’ the issue?
We are just halfway through 2020, but it already feels more eventful than the past few years combined. I’ve had to restrain myself from overusing the word ‘unprecedented’, apt as it is for describing many of this years events. Despite the fastest stock market crash in history and a cack-handed attempt at market timing, my performance so far this year has actual turned out OK at around 13% YTD.Continue reading
More and more of our economy revolves around information technology. A handful of tech giants have experienced unprecedented success in seizing control of large parts of our increasingly internet-dependent economy in just a few years. This trend is only going to increase.
Technology businesses can make excellent investments – many are inherently highly profitable and can scale very quickly. However, assessing the valuation of this sort of high growth business can be challenging.One of the most important and obvious determinants of valuation that seems to get less attention than it should is what the growth profile will look like. Is it likely to accelerate or decelerate and how long will it persist?
The Coronavirus rally continues, though has perhaps started to show signs of slowing down over the past few weeks. I’m still feeling bearish overall but my perspective on how the stock market might behave is slowly becoming more nuanced.
I’m about as bearish as I’ve been on the medium term prospects for the stock market. Like many others, I feel that the stock market isn’t fully reflecting the risks to the economy from the lock-down measures currently implemented around the world. It is already evident that the magnitude of the economic shock is unprecedented. And that’s even if we manage to lift the lock-down measures soon. It seems unlikely that we will to do so fully given the high probability of the dreaded ‘second wave’. In the meantime the economy will continue to suffer. Why then does the stock market seem to be defying gravity at the moment?
I, like many investors, am glad to be seeing the back of that quarter. The Coronavirus has caused a rapid crash over the last month in most stock markets across the world. This has left the FTSE 100 down 27.9% and the S&P 500 down 22.9% over the last three months. My portfolio hasn’t fared a great deal better at 18.4% down. It doesn’t look like we are quite out of the woods yet.
I have now fully recovered from Covid-19, assuming that is what I have had over the past week. The main symptoms were severe fatigue and shortness of breath. This was debilitating enough to excuse me from doing any work or household chores but almost imperceptible if I remained completely immobile, say reading Twitter or watching Netflix in bed. My lungs felt like they took a pounding but have recovered quickly. So all in all not the worst virus I’ve had the pleasure of hosting by any means. I’m thankful to be getting off relatively lightly.
Given the extraordinary times, I’ve updated again below with my latest thoughts on the economic outlook and what this means for my game plan. I’ve also updated on my purchases from last week.
Stock markets have taken another steep tumble since my post last week. People say that the bottom of a market crash happens when everyone gives up, at the point of maximum pessimism. My emotions have taken a bit of a pounding too and I’ve started to feel the urge to capitulate. Maybe that means we are near the bottom? I fear not. I’m trying my best to remain level-headed in deciding the best course of action from here. This probably isn’t helped by the fact that my wife and I are locked down in self-isolation in our London flat with mild symptoms of the virus…
Last week was one to remember! After a big fall on Monday led to comparisons with the October 1987 crash, we had another massive fall on Thursday after markets were unimpressed by Trump’s response of restricting flights from Europe. The result is that we’ve now had the fastest ever market crash by some margin – just 20 days to fall 20% from the highs. Exciting stuff, but a little harrowing if you are fully invested as I am. Continue reading
Well the market has certainly woken up to possible risks from the Coronavirus contagion since my last post! We now seem to be in the midst of a full-blown market panic, with the market yoyoing up and down (well mostly down) several percent every day, as investors overreact to news about the virus, its effect on businesses and the government’s response. To top that we now also have to contend with news of a collapse in oil prices, which have fallen almost 30% over the weekend following the break down of OPEC agreements.
All my gains from what had previously been shaping up to be a good year have been eroded and my portfolio is now squarely in the red. Continue reading