Rolling with the Punches

I read in the weekend papers about the “Santa Rally”. No, this was nothing about Jeremy Clarkson on “The Grand Tour” (which I will always call “Top Gear”) but financial journalists commenting on the fact that December is generally a good month for share prices, although none were sure why that might be. But who knows anything about the markets? I sold out my American Index funds in the belief that the markets would wobble badly if Trump got in and, because I’d had a good run up until that point. I felt I should “take some profits”. Of course Trump did get in, and what did the Dow Jones do? It has only jumped subsequently by 36%.

I console myself with the fact that I sold the US Index and bought Global Dividend funds with the proceeds which, when I look at their portfolio mix, are over 50% weighted in American companies. So I’ll probably have benefited there, but I won’t give myself any credit over it. I know I’ve no real idea which markets and funds are likely to prosper and I only checked the Global Index portfolio spread after I’d bought it.

“Santa Rallies”, “Sell in May and go away” – I’m sure there is some backing to these mantras in the same way that “A stopped clock is right twice a day”. True, but at what time will the clock stop?

I’m not buying anything in December, but I probably will have a look at how my investments have progressed this year. This is because it’s probably looking not too bad – the “Trump Bump” has pulled most things along with it, including the UK market. Seriously though, if you’d have a crystal ball that told you with certainty that both Trump and Brexit would happen in 2017, would your first response have been, “Fantastic, the stock markets will take off after that!”? Somehow I doubt it. I now guffaw when I hear commentators recite that old cliche, “The markets hate uncertainty”. No they bloody well don’t, they absolutely thrive on it from what I’ve seen this year.

What will happen in 2018 then? Well, what goes up must come down, but even if there is a correction, it has seemingly only ever taken the markets 69 days to recover losses from such adverse events in the past. That’s even happened after the dot com collapse and the financial meltdown of 2008. I’m going to make a real effort to remember this adage in case 2018 sees a downturn, and maybe I’ll refer back to my dairy of 2007 and 2008 when queues formed at Northern Rock and Lehman Brothers imploded. I’ve read through my entries from those months before and was I panicking? Was I even slightly bothered? If I was then I wasn’t writing it down. Like everyone else, I rode it out and I’d probably do the same next time ’round. 

So, when I think back over 2017 I reflect that it’s been a pretty major historical year that’ll be recalled as a watershed on a lot of fronts. Uncertainty abounded, but the markets strode on regardless. Keeping an open mind and remaining flexible when it comes to finances seems to me to be the best advice I can give myself in the light of what has gone on. Anytime I try to be smart, such as making the call on Trump being elected and believing that Britain may well Vote Leave, I failed to foresee the consequences that would have helped my investments. I guessed the right results and then guessed the wrong market response.

Hindsight is 20/20 vision, of course, and it’s that historical data that pushes information on December “Santa Rallies” and “69 days” of recovery. They’re interesting statistics, but they still tell you nothing about what will happen either in January or Day 70, except that those days will come too. Just like Trump and Brexit, what choice do we have but to live through them and roll with the punches if, it transpires, that’s actually what they turn out to be?

8 thoughts on “Rolling with the Punches

  1. Sometimes I need reminding that financial management is not speculating about future events, which it seems that everyone and his dog does better than me and wants to tell me about it too.

    Cullen Roche wrote good piece about this;
    https://www.pragcap.com/idgaf-fomo/

    I’m writing a IDGAF post-it for my laptop screen, I’ll write one out for you too 😉

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  2. On the bitcoin, take a look at this -> https://davidgerard.co.uk/blockchain/2017/12/17/why-you-cant-cash-out-pt-1-why-bitcoins-price-is-largely-fictional/

    It is horrific! People are going to lose their shirts for sure

    Talking about 20/20 hindsight, what about owning one of those financial instruments that aviva have been lumbered with?

    http://www.thisismoney.co.uk/money/news/article-5186489/You-owe-ONE-BILLION-euros-investor-tells-Aviva.html

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    • I too think that’s it’s going to go horribly wrong for people who have piled into bitcoin without thinking of the consequences. At a house party I went to over the weekend, I listened to one guy saying how he ‘easily’ made £2k profit selling bitcoin (although at one point, he was on £9k profit apparently). I wonder how many people he told that story to will also jump aboard without doing their own research. Me, I’ll just watch from the sidelines!

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      • Bitcoin is mental. I’ve read and read about it and have still no idea how it works. My son (who has first class degrees in maths and computer programming) doesn’t understand it either! I often wonder how difficult it is to find a buyer at the ridiculous levels it seems to have risen to?

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  3. I’ve got a PhD in computational physics and I know exactly enough about bitcoin to warrant not buying it, i.e. how much its has appreciated and how *infested* with criminality it is. No requirement whatsoever to understand the mechanics behind blockchain.

    John ‘Mad’ Mcafee is evangelising it, the perfect canary in the mine, you know not to touch with a bargepole..

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  4. > it has seemingly only ever taken the markets 69 days to recover losses from such adverse events in the past

    Nice rhetorical turn of phrase but it’s not true. I was there in the dotcom bust and it took a gutting seven years for the FTSE100 to reach nominal parity, only to get ready for another heave-ho in 2008. Some of that dotcom stuff never came up for air.

    Old stagers’ win here is that most of your investing wasn’t done a the peak, plus you get dividend income. But I do pity the poor devils that are starting their investing career now. If they stay the course over 20 years it probably won’t matter, but hitting a bear market three years after you start regularly investing is a very different feeling from hitting it ten years out of the gate. It’s easy enough to say IDGAF when you’ve gained less rather than when you’re on a 30% loss. It’s years in the market that help you get to the former, but it’s quitting on a loss that stops many ever getting to years in the market.

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