My portfolio performance – July 2016 – new UK PM

The start of the month saw, pretty literally, anarchy in the UK.  By the end of the month the new Conservative government had made a decent fist of getting going, and Teresa May was starting to become a familiar face as the UK’s new head of government. Stability is returning, even if profound uncertainty regarding the Brexit implications remains.

From an investment point of view, measuring of course in pounds, it has been an amazing few weeks.

FTSE has risen above 6700.  A few weeks ago it fell below 6000.  If it manages that gain again it will be at an all-time record high. And the USA’s S&P reached new records, nearing 2200.

Bonds continued their relentless upwards march.  With interest rates seemingly staying lower than ever, and stability being prized, so bond prices are rising.  SLXX, the UK’s iShares Corporate Bond ETF, has risen from 130 in January to almost over 149 now – a rise of about 15% in six months.  Excluding coupon payments.  Astonishing.

And the pound, while much lower than pre-Brexit, has been relatively stable for a month.  It’s bounced between 1.29 and 1.33 to the US dollar.  In the context of its range of 1.37 to 1.58 in the previous 12 months, this is rock solid stable.

Against this backdrop, my portfolio returned a tasty 3.8%.

Equity markets continued their rally in all my key geographies.  Bonds barely moved, except in the UK where for some inexplicable reason (to me) they gained over 4% on the month.  The pound lost a bit of value against all my key comparators but this was modest compared to the asset price rises.  My debt gearing continued to help – notice how the geared UK return at my target weighting was over 5% despite the best single component of it being less than 5%.

I’m up over 15% so far this calendar year – in just over six months.  This is almost surreal. I’ve more than made up the egregious stamp duty I paid on the Dream Home, in just a couple of dozen weeks.

In fact such strong performance has me heretically wondering if I shouldn’t be adjusting my exposure a little.  I wouldn’t mind reduced exposure right now; I don’t see too much upside opportunity in equities or bonds in any markets.  Whereas I do see downside risk everywhere I look – whether it is the chance of Deutsche / Italian banks imploding, Trump being elected, Russia doing something geopolitically terrifying or the UK skidding into severe recession.  So in a softly softly way I’m going to come out of the markets just a bit.  Not that I can time markets, obviously.  Don’t try this at home.