August turned out to be a more difficult month for UK Markets as Global economic growth worries and the US / China trade dispute continued to rumble on in the background like the inevitable summer thunderstorms. In addition the BREXIT circus continues and some fear that a no deal exit is now more likely, although perhaps a majority of MP's will make sure that doesn't happen and maybe that we never even leave.
All that seemed to hit FTSE 100 harder this month, which is perhaps a bit surprising as Sterling lurched down again on the no deal fears, but perhaps it just reflects some selling in thin markets and the larger more liquid names being more exposed to this? In any event Mid and Smaller Companies held up slightly better and as a result all the indices remain above their respective moving averages, although only just in the case of the Small Cap index. So the timing indices still suggest remaining invested as do the other economic indicators that I watch in this regard, although they have recently started showing some signs of weakness too, which is worth watching given the worries about economic growth generally. Plus the fact that we have now seen yield curves inverting, which while not an immediate timing / sell signal, these have had a good track record of occurring before previous recessions albeit often quite far in advance.
As I hoped last month this also led to mean reversion and bounce back in the performance of the CIS Portfolio, although this is only in a relative sense as it produced a smaller negative total return of -1.25% v - 3.57% for the FTSE All Share. This does however put it back ahead of the FTSE All Share for the year to date with a return of +13.38% v 11.12% for the Index. While since inception it has produce 13.54% per annum versus 5.56% per annum for the FTSE All Share.
Post the summer break I've decided to make a couple of changes to the portfolio based on selling stocks where the Scores have deteriorated and stayed low despite results from the companies concerned. These were replaced these with one large fairly boring defensive stock, given the background / outlook and a smaller growth stock operating in the healthcare which seems to offer reasonable value, although there may be some political risk as it works with the NHS.
Subscribers to the Scores can see those transactions and changes to the portfolio in their Scores file now. If you unfamiliar with them and would like to find out more about the Scores which have helped to produce the performance discussed above, then please see the link in the relevant site navigation bar or by clicking here.
Finally as we continue to sail in what seem like uncharted investment, economic and political waters I'd suggest having your life jacket at the ready, keeping an eye on the lifeboats but continue to enjoy the voyage and the music as the band plays on in a patient and common sense fashion as Lord Lee would recommend in this interview about with him about his new book designed to explain Stock Market Investment to children.
Another strong month for equities helped the UK Market timing indices that I calculate to push further ahead and above their moving averages. This was led by the larger more international FTSE 100 as Sterling fell on the back of increased rhetoric about a no deal BREXIT from the new PM Boris Johnson. Mid Cap and Smaller Company Indices did less well given their more domestic focus and BREXIT related worries. Nevertheless they are also in positive / bullish territory in terms of their timing indicators, to the tune of 3 to 5% versus the 7 to 7.5% for the larger All Share & FTSE Indices.
As for the CIS portfolio this month the less said about that the better as it suffered from its bias towards Mid and Smaller Companies this month and in particular from a poor new selection last month which went onto warn and 9 other positions that fell by double digit percentages. Against this the portfolio only had a few positions that rose and none of those by double digits percentages.
Consequently the portfolio did -3.3% versus the +2% total return for the FTSE All Share, which now leaves it slightly behind for the year to date. Hey ho, I guess that's the rough side of a focused portfolio which will diverge from market returns in both positive and negative directions.
As it has just had a couple of bad months, we are in a holiday month and I am in the process of completing a relocation, I've decided to leave the screening this month. This will let the dust settle and the portfolio may even benefit from some masterly inactivity and the magic of mean reversion, perhaps. That's all, now for some more sorting out, hope you have / had a happy holiday wherever you manage to go.