We are firmly back in the fold of predictions, forecasts, projections, scaremongering and full-on optimism as we end the first full week of January. In 2023 and 2024 there were many short-term changes of sentiment and mini cycles which changed the mood for investors. However, reacting and responding to such short-term changes was fraught with difficulties for those intent on trying to avoid the downside and capture the upside.
Let’s take July and August of last year; our in-house technology portfolio fell from the 11th of July to the 5th of August by 13.78% (net of Blue Sky charges). You may remember there were fears about the US falling into recession. Pleasingly, none of our clients sold on the back of the fear which was driving sentiment at the time. Helped perhaps by our “stop press” announcement which clearly stated that investors should hang tight. Good job too, because from 5th August to the end of the year, the technology portfolio rose by 22.06%!
The well-worn phrase is that “it’s time in the market that is important, not timing the markets”. Actually, both are true. It’s also the case, that it’s important not to overreact to short-term sentiment.
As usual, there is a lot going on right now. I’m going to drill down into the UK but, of course, what is happening in the UK, in some ways, has similarities to the rest of the developed world. On the other hand, comparing the US with the UK could be deemed unhelpful as there are marked differences.
US stocks are, by most measures, expensive. Ignore the US market at one’s peril though, but it seems to make sense to pair back exposure in some quarters with valuations stretched, despite the likes of Martin Sorrell stating that the US economy is the most buoyant it’s been since the 1980’s.
On this week’s agenda:
- Bond yields rise but what’s the outlook for 2025?
- What do higher bond yields tell us?
- UK’s borrowing costs hit a 27-year high
- UK companies cut jobs at fastest rate for 4 years
- UK outflows continue
- Allocation to alternatives set to rise over the next two years
- The US… the most buoyant since the 1980s!
- Summary
Bond yields rise but what is the outlook for 2025?
An article in Bloomberg earlier in the week talked about how the Federal Reserve (Fed) and Wall Street haven’t exactly been in step in recent years.
Investors mostly failed to forecast how high interest rates would change after the pandemic, thinking they would cut much faster than they did.
Continues…
Want to get this in your inbox?
Our CEO, Gary Neild, writes engaging Market Commentaries every week. If you would like to receive the full version straight to your inbox every Friday, please join our communications list.
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.
