Stock markets' update
Posted by jdavis on June 3, 2010
This was an email sent ONLY to clients. After some while we put it up on our site.
Please remember, investments can fall as well as rise. And they will!
Please also remember, no trend goes in a straight line. Otherwise it would be called a straight line! The trend in houses and stocks is still very much down, in our view.
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As you know, the markets fell from late April to last week. The fall took us back to September 2009 levels. They are rising now and the media and other vested interests want you to believe that the fall is over and La La Land economics and markets reassert themselves.
This is a short strategy note to say that the market trend has most likely altered convincingly, from rising to falling. Our clients sold a lot around 1080/1100 on the S&P 500 and, as the index moves swiftly from 1040 back up to 1150/1175 (currently 1100) we shall likely recommend to sell some more. I have high confidence that we shall yet see the markets back to Summer 2009 levels, by the end of this Summer or Autumn (c 900).
I put it at 1 in 3 that the market will revisit the March 2009 lows. On the S&P, that would be sub 700 (40% down from 1150); on the FTSE that would be some 3500 (we are currently at 5250).
In recommending alterations to portfolios, as well as Sales, I am likely to prescribe – in our Cautious Fund holdings – a move from Ashburton Sterling Asset Management fund to Eclectica Absolute Macro Fund, click here for the fact sheet. This is a new fund, aiming to replicate for retail investors the phenomenal achievements of The Eclectica Fund, which is for professional investors only. Many of our clients already invest with Eclectica in the Agricultural Fund. Interestingly, the Absolute Macro Fund did exactly what it seeks to do during May. When markets fell hard, the price of this fund stayed effectively flat. Wonderful. It is my view that this fund will achieve similar or greater returns than the Ashburton Fund, however with reduced downsides.
We will, as ever, contact clients individually who are affected by recommended changes to portfolios.
NB. £1 = €1.20 and rising. Broken out of 52 week highs.