June 2019/Q2 review

We live in extraordinary markets. Time for a quarterly look back at my portfolio.

What’s been going on?

In the last three months:

  • Theresa May has finally thrown in the towel. Her replacement, either BoJo or Mr Hunt the Culture Minister, will take over on 22 July, barring upset. This follows a European parliamentary election, in which nothing very surprising occurred.
  • Huawei has been in the news a lot. As has Mr Trump.
  • The conservatives won an Australian election, against the odds.
  • Neil Woodford, a person in the UK, suffered a run from depositors.

The markets

June saw some of the most benign market movements I can remember. I don’t have a clear sense of why. Here’s the outcome for the month:

Taking a slightly longer view than one month, one of the most notable features of Q2 was the fall in the pound from $1.31 to $1.26, on the back of UK political nonsense. Equities rose in April, fell in May, and more than recovered in June; FTSE moved in Q2 from about 7279 to 7426, and S&P 500 from about 2830 to about 2930. Bonds rose much more smoothly, up over 2%.

My portfolio

The June market movement, weighted for my target allocation, was up 4.0% (with FX pretty much flat). My portfolio rose by almost exactly this.

What’s extraordinary about this year so far is that markets, as a whole (as weighted by my allocation), have risen over 15%. In six months. These returns are pretty extraordinary. But you wouldn’t catch it in the mainstream media, what with the Woodford/etc woes to read about instead.

Q2 saw me both recover my investment portfolio to roughly the level I started at before blowing a large chunk of it on my Dream Home, and also finally officially Double my portfolio (ignoring additions/withdrawals) since the start of my monthly tracking on 1 Jan 2013. Happy days.

My posture

I finished Q1 hoarding cash, waiting for the new tax year. I was underweight equities, most notably the USA.

In Q2 I deployed most of my hoarded cash. Nonetheless, I have found myself, for most of Q2, slightly underweight the USA. I have been slowly deploying dividends/excess cash into the US markets but haven’t managed to close this gap.

My delta from my target allocation, as at 30 June 2019

Other key metrics

As to expenses, and taxes….

At some point in Q2 I updated my expenses calculations from scratch. I can’t remember what difference this made, but it suggests my overall expenses are now only 43bps (versus 55bps reported in Q1). I don’t think this drop is completely accurate; I think my Q1 figure was overstated, but some of this drop is real – based on exiting some expensive holdings and deploying incremental funds into low cost places. Whatever the actual number, as before, my expenses are significantly inflated by my stubborn loyalty to a private bank.

My effective tax rate has dropped very slightly to 29.1% (from 29.2%). Though, at the start of Q2, I moved £40k into my and Mrs FvL’s tax-free ISAs, this hasn’t made much difference to the blended total.

I am hearing numerous rumours that the Labour party is planning a one-off, short-sharp-shock wealth tax if it gets to power – along the lines of 15%-20% of wealth above a (not yet determined) wealth threshold, overnight. While I would find such a policy pretty shocking, it would, if only applied to my liquid portfolio, wind my personal clock back by less than 12 months. Food for thought.

4 thoughts on “June 2019/Q2 review”

  1. This explains why I’ve been getting such good returns, even with barely anything invested. I’m just gutted I don’t have more invested to benefit from it even more 🙂 I almost want there to be a recession at this point, the earlier the better for me. Or maybe the bull run will go on forever?? Haha.

    It’s going to be quite depressing hitting all of my early financial goals then seeing them all get wiped out after a massive correction.

    What are your thoughts on why this extraordinariness is happening? We’re meant to be in turmoil, right?

    Liked by 1 person

  2. “Neil Woodford, a person in the UK”: I think he can now be safely promoted from “person” to “silly ass”.

    In the great scale of things he is as nothing to the affairs of Deutsche Bank, though.

    Liked by 1 person

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