I have prepared my IM Thoroughbred Core Alpha for bad news, though the extent of August’s market falls and an apparent loss of all confidence in the global recovery from recessionary 2008/2009 have still taken me by surprise.
As protection goes, I have some cash, some absolute return, some UK commercial property, plenty of fixed interest of varying colours – though no gilts – and that most valuable of commodities in this circumstance, gold – retaining 5% after today trimming just a little of the profit.
In emerging economies, allocations have been reduced, with a sale of most of my Brazil investment trust in favour of Russia that still looks too cheap to me. It is fair to say that risk assets broadly are looking much better value, though I can see the short-term risks.
Again, to repeat something I have said in previous months, it is noticeable how the BRIC economies, still showing great GDP growth compared to the UK and most other developed markets, have not all seen a translation in investment returns in recent months.
UK equity income has stood me in good stead relative to the broader market, though I have just added a FTSE All Share tracker to holdings under the heading of ‘growth’ – I also dropped my profit taking from gold in there.
UK commercial property still finds a home in my portfolio, for diversification and an anticipation of steady yield, but I have taken out my Asian-specific overseas property holding in favour of a broader, global mandate.
Should we worry that the Fed has had a bit of a pie in the face from Standard & Poor’s? I don’t think so – I understand how and why it is worrying people but it is a technicality, as the US surely can’t be considered a risk by comparison to others.
Historically S&P’s views have held some sway, but they’ve also made some howlers and, after all, the French are still AAA – sacré bleu…
