August ’24: From triumph to tragedy

Looking back on the month, it was more eventful than Augusts are reputed to be.

In the UK we are getting used to our new government. And, in some cases, violently testing its boundaries with some summer rioting. We’ve seen some dreadful street behaviour, frequently of a racist / anti-Muslim nature. Thankfully it hasn’t really impacted London, where racism is mercifully rare. The street protests closest to me were jubilant Bangladeshi crowds celebrating the overthrow of Prime Minister Hasina.

Across the channel, the Olympics provided some sporting entertainment. I didn’t make it over there, though, and only watched a couple of events. It was good to see Team GB do creditably well, though beaten on several measures by the Australians and even the Netherland for Pete’s sake. On any sort measure, Europe (inc Team GB, naturellement) thrashed everybody else, though that isn’t how even the FT reported it, and India did typically dreadfully.

Towards the end of the month came the truly horrific tragedy of the sinking of British entrepreneur Mike Lynch’s yacht Bayesian. I don’t think there are any wider lessons for me in this tragedy but somehow it felt very relatable. And to pile mindblowing co-incidence on horrific tragedy, his former business partner (and co defendant in US Federal Court) died earlier that week when hit by a car. If there was a conspiracy at work, it was a particularly devious one, but it is a terrible end to an extraordinary story.

Markets in August 2024

The markets have been nervy and volatile in August. VWRL, Vanguard’s global equity index tracker, was at £102/share on 30 July. During August it dipped to £98, and rose to £104, before finishing on £103. So the signal of the monthly numbers strips out a lot of noise.

Of more significance for us UK folks was the rise of the GBP during August. It does feel as if we may be seeing a re-rating of UK Inc in the currency markets. Against our EURopean peers there isn’t much to see – the GBP now buys €1.18 rather than €1.16, but against the USD there has been a 4% lift from $1.26 to $1.31. On a five year view we are reverting to the meanh, but the ascent from the low point of Trussite madness in September 2022 is dramatic. It’s conceivable the £1 GBP will buy $2 AUD before I next visit Oz, which would be a welcome shift.

The underlying source of GBP strength appears to be twofold. One the one hand, the UK now has a government that sounds sensible, talks about growth and balancing the books, and has a strong parliamentary majority puts the UK in a strong position versus France (where ‘ungovernable’ wins the press bingo competition after Macron’s pre-Olympic election fiasco), Germany (where the Alt Reich is ascending alarmingly) and the USA (where the attention is all on Presidential candidate Harris but nobody seems to be thinking too sensibly about the economy). The second factor is interest rates, where the Bank of England’s noises suggest GBP base rates are probably staying relatively high versus the USD and the EUR rates too.

The markets overall in August rose a weighted 0.6%. US equities look strong until you allow for the weakening USD.

My portfolio dropped 1.3% in August, an annoying lag versus the market. AMZN and GOOG, two big holdings of mine, both dropped about 5%, which i suspect was a contributor. In reality different subaccounts delivered quite different performance – it was one of those months.

August is lousy month for dividends, but also didn’t see any big calls for cash – which makes a relief, compared to several months earlier this year. My leverage levels remain very stable over the last few months, despite having had to raid the margin loan piggy bank a couple of times. Hopefully September’s bumper dividend crop will allow me to resume my margin loan repayments.