August 2017: Nationalism and the marketPosted: 2017-09-02
I’m a patriot, you’re a nationalist and he’s a xenophobic racist Nazi pig. We’ve all been conjugating the irregular verbs of narrow mindedness in August.
Having recently read Jodi Picoult’s Small Great Things, I found the Charlottesville incident fascinating. I was interested afterwards by the political/business angle. Business and the Republican party have just had a wedge driven between them. It’ll be interesting to see how long and wide the Democrats can make the wedge. I’m not confident that Bernie Sanders’ party can capitalise on the opportunity, but let’s watch and learn.
Over on this side of the pond the Brexit process is getting stuck in quicksand. Nick Clegg puts it well in the FT:
“Conservative Brexiters and the rightwing press have started to do what they always do when things don’t go their way: whining about how intransigent and slow the EU is (what do they expect? It is a convoy of 27 governments) while throwing insults”
I’ve caught up with two friends who voted for Brexit in the last few weeks. Trying as I might to be open-minded to their perspective, I find myself reflecting how an underlying dynamic of many Brexit supporters is an inability to consider the world from other countries’ point of view. This failing is at work whenever you hear Brexit types say they want to be in the single market but retain full sovereignty. This argument doesn’t address the fact that if all the other 27 EU countries had the same objective you’d have 28 countries all railing against the protectionism of each other and with no shared institution for resolving the disagreements.
The link between civilised Brexiteers like Daniel Hannan and the appalling thugs at Charlottesville may not be obvious. But to my mind the white supremacists’ inability to consider how the world might end up if everybody thought as they did feels worrying similar to the attitudes of many of the Brexiteers – certainly anybody who aspires to ‘take back control’ but remain in the single market (which includes quite a large portion of the 52%).
You can call it patriotism. You can call it exceptionalism. But it feels like blinkered supremacist thinking to me.
In any case, the Charlottesville fracas doesn’t seem to have much impact on markets. The most obvious development in the month was the rise of the euro and the continued fall in the pound. The weighted portfolio impact for me of these forex movements was a 1.5% gain, thanks to the large amount of non-UK exposure I have.
In both the GBP and Euro cases the equity markets somewhat ‘auto-corrected’ – FTSE rose slightly and the Euro equities fell slightly. In the meantime, USD equities remained flat.
Bonds rose across the board in August. I’m not sure why.
Across equities and fixed income the market, as weighted by my exposure, rose about 0.4%. On top of the forex gain this added up to a 1.9% tailwind. Handy, having a globally diversified portfolio, isn’t it?
How did I actually do? I didn’t gain 1.9%, sadly. My portfolio grew ‘only’ 1.1% on the month. This still equates to an annualised 14% or so, so I’m not complaining.
In other news, I am increasingly nervous about the stories about ‘longest bull run‘ and high valuations, so I’m trying to deleverage. I managed to reduce my margin loan by around £50k, by selling leveraged assets. I’m slightly underweight on UK equities, but remain very close to my target allocation. I haven’t made much progress on shifting assets into tax efficient buckets (Mrs FvL, for starters) but am increasingly focused on it. Watch this space.