Nov 2020: spirits lifted in lockdown 2.0

November saw the second national lockdown in England.

Most shops closed. All pubs/restaurants closed. Hair dressers closed. No social mixing indoors, and max 1 person to be met up with outside. Not a whole lot of fun. The weather has been relatively nice to us – it’s been damp and chilly, but not unrelentingly so. I’ve found some new parts of London.

Not exactly lyrical

This country park perhaps doth protest too much
The mother of all parliament’s hill
What counts as a park, in London

At work, we assumed things would turn downwards – as business became harder to do. But in fact we were busy in November. Much busier than we expected.

Trump is now officially a loser. It feels hard to describe Biden as a winner – perhaps I know how Trump feels? – but it is certainly easy to describe Trump as a loser.

But the word of the month has been Vaccines. Both an expensive Pfizer/BioNTech one, and a ‘good enough, and easy enough, and cheap enough’ one from Oxford University/AstraZeneca. Suddenly the mood music has changed very much for the better.

Injecting some stock market pep

Having tumbled in the closing moments of October, stock markets have found it fairly easy to look good in November. But how good they look!

Equity markets were up 10% or more everywhere. Bonds were flat, by comparison – though note that the red bonds cell above in the USA column is in fact up about 1% in the month – by no means a shabby return. It’s only red relative to the tenfold better result obtained by stocks.

I had plenty of accounts/portfolios delivering well over 10% on the month. Overall however I was up 6.7%, all in. Which leaves me up, in 2020 so far, 6.3% – suggesting that 2020 may end up looking like not a bad year to be invested. Which is not what any of would have thought in March/April/May – as Monevator points out in this weekend’s post.

I remain tactically overweight cash – by about 3% of my portfolio – and a little bit underweight equities. I’m planning to stay like this until after 1 January, to let the EU/UK Brexit trade deal farce play out.

In unitised, market gain terms, we are now in previously uncharted territory – with world markets – especially the USA – at record levels. However in actual, absolute income terms, my last 12 months dividend/rental/etc income is back down to levels last seen in mid 2016 – during which time the portfolio’s returns have delivered 57% growth. This is partly the result of swapping my former home (let out at about 3.5% yield) for a void period, selling it, and turning the proceeds into equities in February this year – just at the previous record stockmarket levels. But this is main the result of dividends being cut all over the place. With a spot of luck 2021 will be the year investment income jumps up sharply, following the markets albeit with a lag.

Portfolio returns vs levels of portfolio income, since mid 2016

2 thoughts on “Nov 2020: spirits lifted in lockdown 2.0”

  1. What are your considerations and reasoning for this?
    “I remain tactically overweight cash – by about 3% of my portfolio – and a little bit underweight equities. I’m planning to stay like this until after 1 January, to let the EU/UK Brexit trade deal farce play out.”

    I’m somewhat thinking that the value of GBP could drop significantly if something goes wrong and am considering to reduce my GBP cash exposure for that reason.

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    1. Matt – for ‘as it has occurred to me’ reasoning, check out these posts:
      https://firevlondon.com/2020/03/21/the-worst-crash-in-history/
      https://firevlondon.com/2020/06/02/may-2020-a-sunny-month/

      Overall I don’t think of GBP cash as an investment option, because I measure my portfolio in GBP. I agree that there is a risk of the GBP dropping significantly – recent history has shown that you do not generally regret ‘betting against the UK’ with the Brexiters calling the shots. If this happens then FTSE-100 (which is largely overseas revenues) and my USA/etc holdings will grow in GBP terms by far more than my GBP cash holdings will lose spending power.

      Overall I want to keep ‘dry powder’ so I can buy low (if my exposure drifts too much off its target). I am happy to cede a little bit of equity upside in exchange for a bit more buying flexibility.

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