The year 2018 has certainly been my worst investment year since I started controlling my own portfolio some fifteen years ago. It was a fine start for the first eight months, on the back of the performance of the dollar-based funds, technology funds and Vietnam, but then it all turned South. Fortunately I headed for cash and gold funds in the last quarter, but in hindsight I could have been more speedy and taken larger steps. At the end of the day I have been left with a small annual profit of 2% down from an expected 8%-12%. No question, a very disappointing year.
The big question however is what to expect from 2019? At the moment there are no clear signs as to which direction it will move, be it down or up. If it moves up, one has to be careful that it is not Mr Market coaxing everybody back into the pool before he throws in the toaster!
The graph below clearly shows that during the last financial crisis there were a number of false starts before the recovery really got underway. The decision as to when to re-invest is the generator of goose bumps, and can only be taken by you looking at the best numerical information available at the time. It is only natural to try and anticipate the direction of the market by looking at, and examining, the potential investment opportunities and pitfalls – the difficulty will be in staying your hand before you have finite confirmation. This is no easy decision, and for my part I will take Jesse Livermore’s advice, and when I do decide to start reinvesting I will take small steps first, whilst the direction of travel becomes certain.
Looking at the downside into 2019 I see that my Four Horsemen of the Investors Apocalypse are in obvious plain sight. They are Brexit, Trump, Corbyn and a potential EU financial stumble. I can see little point about discussing these, as like me you are probably bored to the back teeth with the endless rambling in the media, none of which can be trusted as meaningful or useful. My own tongue-in-cheek take on the four is – Mrs May is like a fly looking for a windscreen – Mr Trump will continue to frustrate the political world whilst lining his family’s pockets – Mr Corbyn probably wishes he was not in his present role, and hopes that he does not become Prime Minister only to be forced to reveal the paucity of his communist economics – Mrs Merkel, who runs the EU for the benefit of Germany is hoping that her retirement comes before the finances of the EU start to collapse!
Looking to the upside is more difficult. I can see no obvious standout positives. I do wonder whether China and Trump will reduce their differences so that combined with China’s major spend on railways and infrastructure in general, it might kick start a recovery in this market. If this were to happen, then Asian Emerging markets would also pick up and follow suit. Wishful thinking perhaps, but if it did occur then I would reinvest, especially into Vietnam.
I also wonder how long the dollar will stay strong and why the American markets have not reflected the increase in tax take, the dramatic fall in unemployment and the significant increase in labour wage rates. Perhaps when the falls in the FAANG values and the rises in the FED interest rates have been fully absorbed, this will be reflected in a more positive future market price. I guess that Brexit might produce some interesting opportunities for the future, especially should the exit result in some form of WTO. Like it or not, this would certainly produce a switch back ride for both Sterling and the UK markets.
Well, what can we expect from 2019? It is certainly going to be an interesting year and hopefully if there is to be a general recovery, then my cash must be used to join in with these gains. I do believe in being an optimist when looking at my investments and to have faith that tomorrow will be better than today. Surely after the last quarter of 2018 that is not such a big ask!
Best wishes and good investing,