So as predicted by Frank Sinatra's lyrics last month, markets are back on top after a scorching June both in terms of the weather (eventually) and market returns. This came about as investors moved to discount and celebrate the prospect of a US rate cut in July (now seen at a 90% to 100% probability) and this drove the S&P 500 up to another all time high.
Of course as always seems to be the case, FTSE lagged and failed to regain its highs just yet probably as the BREXIT uncertainty and the Tory party leadership circus continue to roll on. Nevertheless FTSE 100 did manage a total return of +3.97% which was stronger than that from the Mid 250 +2.87% and the Small Cap +0.56%.
The FTSE All which I use as the benchmark for comparing the Compound Income Scores Portfolio (CISP) to produced +3.67%. The CISP lagged that return this month with a +1.96% return as it gave back some of the out performance it achieved in May's swoon. This leaves it up by 18.74% YTD which compares to 12.97% for the FTSE All Share. Since Inception just over 4 years ago the CISP has produced compound total returns of 15.37% per annum which compares to 6.21% from the FTSE All Share and see the graph at the top for how that compares with the Mid Cap and Small Cap indices too. If it can keep that up it will be on course to have doubled in 5 years.
Given the positive returns this month from equity markets the timing indicators for the UK Market that I produce are further into positive territory so suggesting no need to panic and to stay invested even though returns this year seem a bit too good to be true this year. Guess we'll have to wait and see what if anything the G20 meeting between Trump and Xi Jinping brings forth in way of any sort of truce on the Trade War as this article from Reuters suggests it might.
If that happens that it could help to keep the rally going as could a US rate cut assuming that investors still see the glass as being half full and celebrate it rather than being worried about why they are doing it. If neither of those come to pass then I suspect we could see another relapse, but hopefully July will bring your portfolio all that you wish for. Meanwhile I think I'll continue to my bit for the economy by trying to help out some struggling retailers as the following cartoon about a man on his death bed struck a chord with me.
"You're riding high in April, shot down in May
But I know I'm gonna change that tune
When I'm back on top, back on top in June. "
From That's Life by Frank Sinatra
So this is a delayed end of May update in the same was that Mrs May has delayed her departure as PM and leader of the Tory party. In my case the excuse is I've been busy on personal matters.
In brief as you know markets were poor in May and the Compound Income Portfolio (CISP) was also down, but by less than the overall market and therefore extended its out performance for this year and since inception. Please see the Portfolio tab for the full details of that and all the history since inception in the portfolio tab or at the high lighted links if that's of interest to you. You can also read more about the Scores from which the Portfolio is selected in the Scores tab & how to get access to them too.
Meanwhile in terms of the market timing indicators that I follow for the UK market, these remained in positive territory at the end of May and therefore suggest staying invested despite the wobble in May, as do the recent economic statistics from the US. Interestingly the Mid 250 was the least positive probably reflecting the more domestic orientation of its constituent and the on going sluggish growth / uncertainty brought about by the BREXIt impasse, but more on that later.
Since the end of May (the month) markets have cheered up as it seems that the US Federal Reserve has had a change of heart and decided to roll out a Powell put, so investors are now half expecting a rate cut by as early as next month with another to follow before the end of the year. That's quite a turnaround and thus we have had a decent recovery in June back toward the recent highs - so as in the words of Frank Sinatra we are nearly back on top in June.
Personally I'm not so sure it's off to the races again as the Fed may actually be acknowledging that they have over done the tightening and that a big slow down or even recession is on the way. Indeed the dreaded yield curve has inverted again in the US and this time more significantly by around 20 basis points or more as measured by the 3 month to 10 year curve - which suggests a recession probability of around 30% in the next 9 to 18 months or so, although PMI's in the US remain above 50 in the US but have dipped below that in a few places in Europe.
Thus it will be a case of remaining watchful to see how this pans out and whether the Fed are able to cut sufficiently quickly and far enough to keep growth going or if it is already too late to avoid a slide into recession. The other joker in the pack is of course Donald Trump and his trade policy (war) with China and how that turns out. I guess there's an outside chance he could be planning to reach an agreement to provide a boost to his 2020 re-election hopes - who knows how his mind works?
As for Mrs May can't say I'm sorry to see here going, but I do feel a bit sorry for her as delivering BREXIT seems to be a bit of a thankless task, even though her meaningless phrase BREXIT means BREXIT is not what she meant at all as I think she was a remainer at heart. Now we have the farce of the Troy leadership election to look forward(?) to. I'm not that confident that this will solve the BREXIT problem as even if a Johnson or Raab type candidate get in and are committed to leaving without a deal on 31st October if necessary, parliament and the Speaker seem determined to block it. Indeed Labour have said as much today, which makes it curious that people seem to think that the Tories would be obliterated if there was then an election. As assuming they had a BREXIT leader who tried to deliver BREXIT but was blocked by Labour wouldn't the 52% be furious with Labour & not the Tories? Personally I still doubt we'll ever leave and will probably be forced into another extension with the condition that we have another vote to get the "right" answer this time as far as the EU and UK politicians are concerned. Who knows maybe by then everyone will be so fed up with the whole business that they'll vote to stay just to get it over with four years down the line - what a waste of time and money.
So that's the end of the rant - That's Life I guess, so lets carry on regardless for now, but mind how you go out there and enjoy the rally while it lasts and may I wish you nothing but the best for your investments.