2016 Investment Review
This is our last update for what has been a rollercoaster year.
Green Start but Premature Red?
We started the year with positive sentiment across all markets with Green alerts in January and then started to go Red end of March/early April. Perhaps many may say a little premature ahead of the Brexit vote, but we were locking in gains when FTSE had been at the 5,600 mark when we were Green in January and had risen to 6,200 level in March offering 9.4% gains to lock in.
"You can only con a greedy person"
Is one of out stock "sayings". Our alert sentiment is all about when we bought in and when we are happy with our gains. It is impossible to call the bottom and the top. We were happy with over 9% so we locked out. As we have always said, we can never call the market and we are not “greedy”, so we looked at known facts of when we have made gains as was the case here to lock those away to cash park.
We also went Green at the same time in China for some of our own portfolio as markets had tumbled and again have seen growth in excess of 16% since March.
Brexit Property Red
We then moved to Red for all markets (except China) ahead of second guessing a very close referendum in June and indeed it was. On the Brexit result itself, we immediately issued a Red alert getting out of commercial property funds, locking in gains before property funds started devaluing or suspending trade, indeed some are only just opening up again this week. By doing so, we locked in some gains and missed the 5% overnight devaluation that many fund managers applied.
Hindsight is Wonderful
On the Brexit result, markets tumbled instantly and in hindsight, we should have gone back in quickly but we did not. So we have missed out on some extra growth with the surprisingly quick rebound which we are not happy with but did not see the upswing, indeed we still cannot see the value in it, but equally, we locked in earlier growth and got growth elsewhere.
Japan Quick Return
We also went Green for Japan in November and just locked out last week with growth of 19% in two months.
Most clients will have also seen healthy growth this year, yes it could have been slightly more if you were “brave” and stayed in the US/UK, but equally, you have likely made money rather than not. For most clients, it was certainly better than earning 0.25% in a cash account.
That said, yet again 2016 has demonstrated that we can get it right most of the time, but no one can get it exactly right all of the time hence remaining cash parked for much of the year as we locked profit in early. For us, 2017 will likely follow what 2016 was, which is trying to invest for value at the right time, we won’t always get it exactly right, but if we call it right 80% of the time, then we should see another year of opportunity.
Today, we believe markets are overvalued and we will not go back into developed markets until we have seen a correction. Inflation, interest rates, Brexit, Trump, a weak pound, a strong dollar weakening US exports, may push emerging markets higher but most commentators are neutral at present (AMBER to you and us) for developed markets, so for the first few months, we see the status quo being maintained with Brexit unknowns and Trump’s fiscal policy as yet unknown let alone taking effect.
Where Green in 17?
Initially, it is emerging markets that we will look go green with also keeping China for now. If the Dollar strenghthens, emerging markets will benefit from exporting even more cheaper goods into the US. Trump is the key here. Trade war with China? US protectionism concentrating on US smaller companies and infrastructure spending rather than globals companies. Whichever commentators you read, some predict safe haven Gold up, others a Gold crash, others predict stockmarket rises, others predict a crash i.e. nobodty really knows until "policy" becomes clear. The reality is, we are neutral i.e. Amber to close the year on.