So far as I can see the key geopolitical news in July was a distinct improvement in the US trade war music, if war music is a thing. In particular the EU:USA dynamics improved dramatically when the EU Commission President, Jean-Paul Juncker, showed Trump how to paint trade by numbers.
Given that markets had been fretting that Trump would start punitively taxing German cars, which he has supported for several decades, the Juncker announcement that the EU would buy more soyabeans had a surprisingly positive effect. Or at least, that’s how I account for the 3-5% increase in equity markets in USA/International (Europe), compared to just over 1% in the UK/Australia markets I track.
In other news, the pound fell a bit, and correspondingly the UK equity markets rose a bit. I don’t really know why Oz equities were up, in sterling terms, by 2% for the second month running, but I’m certainly not complaining.
When you take into account both currencies (which gained about .5% against the GBP) and the investment asset classes, markets went up almost 3% in July. This is in sterling terms, as seen by a GBP-denominated UK investor like me.
Against 3%, I could become disappointed that my portfolio ‘only’ rose by 1.5% on the month. I suspect that this figure understates my actual return, as during the month I had a large cash influx. In theory a cash influx makes no difference on my returns, because my returns are on a ‘per unit’ basis. But in practice mid-month changes are not perfectly tracked by my system. And my record-keeping may not have fully caught up. In any case, I am pretty happy with >1% in a month. My medium term returns remain above 12% per year, which is significantly better than I expect in the long term.
I said last month that it is high time I reviewed my progress against my 2018 investing objectives. I’ve now had the liquidity influx I was expecting. While the dust hasn’t completely settled, a quick review of my objectives suggests as follows:
- Reduce taxes & expenses. My goal is to reduce my blended investment tax rate from 30.0% to below 29%. This gets harder when an an illiquid asset suddenly pops up, as cash, in your unsheltered accounts. But having the 2018 goal has definitely helped focus the mind, so I’ve consciously moved more funds into Mrs FvL’s accounts, my personal investment company and into low fee holdings. At the time of writing I think I have this measure at 28.8%. This is a PASS at present.
- Continue to deleverage. I had aimed to slowly reduce my leverage to minus 20% cash. I am making very good progress on this, particularly at the time of writing when I haven’t fully deployed some cash yet. More details will follow in another blog but this is a definite PASS too.
- Professional learnings remains a FAIL, for the moment.
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