August 2018: US 1, UK 0

I’m not really sure what happened in August.

At least, you’d think something quite significant happened, given that UK equity markets fell over 3% and US markets rose over 4%.

The swing of the US:UK currency itself was notable during the month but over the month fairly minor – with the USD gaining slightly based on 1 August (but the gain having been much bigger only a week ago).

The Australians have joined the Brits, Americans, French, Italians and Swedes in bewilderment at the nonsense their politicians can get up to.  But the Australian markets haven’t moved much; the currency fell and the equities rose in compensation.

The USA appears to be making more ‘progress’ on trade, with the news at the end of the month being about some Mexico/NAFTA-related agreement.  Maybe that helped.  Maybe.

In the UK we saw the media running with the ‘no deal’ ball.  How much of this was silly season, and how much reflected the overlooked aspect of the Cabinet’s Chequers deal in which they agreed to take ‘no deal’ planning much more seriously, I couldn’t say. It has certainly nudged me to move my portfolio a bit more out of the UK than I might have done.

So, all in all whatever drove the big market movements in August somewhat passed me by. But 6 point swings between UK and US equity markets, after currency effects, are not common.  Thank goodness I have almost double the allocation to the USA – which rose by over 4% – than to the UK – which fell by almost as much.

2018 08 FIREvLondon weighted markets

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July 2018: The trade news sweetens

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.

2018 08 01 FIREvLondon markets

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.

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June 2018: The liquidity of treacle

Life somewhat returned to normal in June.

By normal I mean the tariff war resumed, Brexit chaos continued, European political dysfunction filled the newspapers  and so forth. The US and Europe now have tariffs against each other on steel and Harley Davidsons.  But more dangerous escalation looms – with Trump clearly gearing up to impose tariffs on German European cars.

From a market point of view the big loser were major exporting markets.  In my world, this meant ‘International’ equities, which lost 2.5%, even as the Euro rose a little against the pound.  UK/US equities dipped slightly too.

On a much brighter note, Australian equities jumped, which I think was due to large electoral bribe tax cut passing both houses of parliament.  Bonds rose slightly, in line with their long run average.

2018 06 market movements allocated

The second windfall that I was expecting in June still hasn’t arrived. Just as well I hadn’t spent it yet; even with ‘liquidity events’ the liquidity can feel like treacle, not water.

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