Nothing changes…everything changes. Here is my summary for “action”.
1. The US market remains robust. Left to its own devices it is the go to place for investors, the american consumer is strong.
2. The challenge is created in the main by the potential black swans of Europe, Brexit and Italy in particular, and the emergence of populist and nationalistic despots around the world.
3. The US is adding to the market’s concerns through the incoherent handling of its foreign policy especially in respect of China, North Korea, Russia and its traditional Allies.
4. The potentially harmful effects of a protracted and ill conceived trade war are becoming apparent – think farmers, luxury goods and declining R&D quite apart from the cost of shifting established supply chains. At the same time the White House is trying to muzzle the farmers with cash and force a low interest rate policy against the judgement of the FED.
5. US policy is focussed not upon the development of the US, or succour to our friends and neighbours, let alone support for the developing world or the truly global challenges we all face but upon maintaining the rump of the President’s supporting voters who he deems critical to his reelection.
So expect further market see sawing within a relatively small range at least in the run up to November 2020. It is unlikely the China dispute will end well, and some at least of the black swans will take wing.
In this context I have sold all shares that did not meet the most stringent criteria – America-centric; solid EPS, growth forecasts and sector futures; low debt; minimal overseas exposure and solid dividend. The gold holdings have been topped up. The portfolio is approximately 33% cash, 33% gold and 33% stocks.
It has already been a good year, we are currently 47% up. I am in no hurry to spend the cash and will hold on either for an unexpected market improvement of for the correction.
All the best, James.
James is advisor to the King Group of wealth managers at Merrill Lynch.