Portfolio Review – end Summer 2019.
The problem is the President.
The office of President rightly commands respect of itself, no matter who may be the incumbent. But eventually performance counts. There has been a marked change in tone towards the White House this summer. Even Fox News has become critical. Leading financial commentators are turning fretful and irritated by Trump’s systemic narcissism and wreckless incompetence. Leading the world’s sole hyper power is nothing like running a family property company. The President is becoming recognised on all sides as the problem.
So how does all this affect our portfolio management?
1. The vast and robust conumer base to our economy remains. However at the margin we also need export markets to underpin the growth of our best businesses. Some sectors (e.g. farmers)rely upon overseas sales. Sophisticated supply chains have been put together over the last decade to underpin the economically optimal delivery of goods and services especially in the most technically demanding sectors . Trump’s bully boy braggadocio has unravelled this achievement.
2. His beggar my neighbour, win/lose foreign policy has alienated friend and foe alike. We are now resolutely set against mutual collaboration on any of the global issues challenging the world – climate change, new technology, education, poverty and health care.
3. So despite its underlying strength the stock market (the S&P) has barely moved over the last 12 months. Winning a return has been a question of stock picking, hence this series. This may be about to change.
4. The sole focus of the President of the Unitd States , far from being on the future of the nation, is now on his own reelection. He will do everything he can to keep the stock market rising at least till the end of 2020. But he is running out of options.
His mismangement has created so many potential black swans that he is hemmed in by geo economic threats that are largely out of his control.
My portfolio has adapted to this reality of a zig zag market within a flat, possibly rising narrow band over an otherwise ribust home economy.
1. So I have stuck with US centric, high dividend stocks with strong growth prospects, reasonable PE’s and little debt.
2. I have continued to play the gold market buying and selling KL, GDXJ, and SSRM.
3. I bought into MA, V and MSFT on weakness.
4. T and RDSA have been added as strong dividend payers with potential scope for growth through 5G and Sustainable Energy.
The portfolio is up 44% for the year to date, which is a strong performance – but it has lost 6% points since the start of the summer.
All the best, James.
James is advisor to the King Group Wealth Managers of Merril Lynch.