Strategies in a falling market

[Lootman]

For you perhaps, if that is the type of mind you have. But various studies have shown that getting your high-level asset allocation correct is more important for risk-adjusted returns than bottom-up stock-picking. And that allocation process consists of getting an optimal balance of stocks, bonds, gold etc., and then a geographic overlay.

You’re confusing two things here. Asset allocation is absolutely imperative to risk adjusted returns. Blindly spreading your investments geographically and introducing currency risk, is not. You should own good companies wherever they are located, if that is what you call “bottom up stick picking” then so be it, but it as after all the original ethos of this place.

I'd agree that one's geographic allocations does not have to be "blind". You may choose to use an allocation that works differently from market cap. And I see different parts of the world differently, which might just be my bias. So for example I prefer North America and Asia to Europe or the UK. I mostly avoid China but over-weight India. And so on.

As an aside I do not consider currency risk when it comes to equities. My approach is that it all cancels out in the long run. I would consider currency if I were a bond investor, but I am not. i am happy to have a low exposure to sterling.

[simoan]

You’re confusing two things here. Asset allocation is absolutely imperative to risk adjusted returns. Blindly spreading your investments geographically and introducing currency risk, is not. You should own good companies wherever they are located, if that is what you call “bottom up stick picking” then so be it, but it as after all the original ethos of this place.

I'd agree that one's geographic allocations does not have to be "blind". You may choose to use an allocation that works differently from market cap. And I see different parts of the world differently, which might just be my bias. So for example I prefer North America and Asia to Europe or the UK. I mostly avoid China but over-weight India. And so on.

As an aside I do not consider currency risk when it comes to equities. My approach is that it all cancels out in the long run. I would consider currency if I were a bond investor, but I am not. i am happy to have a low exposure to sterling.

I guess you’ve not been invested in Japan recently then? Currency risk is very much showing its hand there and owning anything other than a hedged ETF has seen returns withered away by the exchange rate moving against you. And as we know, Terry Smith got his [expletive deleted] kicked by emerging market currency movements, and just look at Turkey at the moment… If all your personal costs are in GBP, as mine are, then it’s a genuine risk and worth considering. Apart from 10% of my portfolio in USD I have no other direct currency risk other than exchange rates for some dividends paid in EUR and USD.

[Lootman]

I'd agree that one's geographic allocations does not have to be "blind". You may choose to use an allocation that works differently from market cap. And I see different parts of the world differently, which might just be my bias. So for example I prefer North America and Asia to Europe or the UK. I mostly avoid China but over-weight India. And so on.

As an aside I do not consider currency risk when it comes to equities. My approach is that it all cancels out in the long run. I would consider currency if I were a bond investor, but I am not. i am happy to have a low exposure to sterling.

I guess you’ve not been invested in Japan recently then? Currency risk is very much showing its hand there and owning anything other than a hedged ETF has seen returns withered away by the exchange rate moving against you. And as we know, Terry Smith got his [expletive deleted] kicked by emerging market currency movements, and just look at Turkey at the moment… If all your personal costs are in GBP, as mine are, then it’s a genuine risk and worth considering. Apart from 10% of my portfolio in USD I have no other direct currency risk other than exchange rates for some dividends paid in EUR and USD.

I see it differently. Japan is a good example. Its currency has been weak (by design) but that can boost exports and be good for shares in a trading nation like Japan. The two cancel out to some extent. Conversely Switzerland has a strong currency and that makes it harder for Swiss companies to be profitable.

My non-hedged Japanese IT has tripled in 15 years, so not a terrible performance.

Also I do not consider that "all your personal costs are in GBP". You might travel and spend overseas a lot, as I do. And a lot of the stuff you buy is imported and so really priced in a currency other than sterling.

It is for these reasons that I take a neutral view on currencies. Plus the fact that it is very hard to predict FX moves anyway. You can spend money hedging a currency and then it goes up 50% of the time.

[jabberwocky]

Surely they have since been castrated? I sold out my banking stocks, that I had before the run-up.

Don't understand this, please elaborate.

The bank run up started around a year ago. I can't relate across the board, but I've had something close to 100% out of Barclays and 60% out of Lloyds - so I think that bull has already run.

[jabberwocky]

One of the most obvious examples of market manipulation you’ll ever see. It is what it is.
The Nasdaq behaving like a micro cap

One might surmise that the whole thing has been about market manipulation - the Independent apparently reported that Trump was boasting about how many people in the room made money trading… after he'd rowed back the tariffs.https://www.independent.co.uk/news/world/americas/us-politics/trump-billionaire-profits-dropped-tariffs-b2731386.html

[jabberwocky]

I don’t know about anyone else, but I sold almost everything in my stock portfolio early in the week (regretably underestimated the effect on banks), so I am now about 10% better off than I would have been if I'd held on to those positions.

So having got the timing right on your sale, may I ask whether you repurchased equities in time for the overnight 10% rip in the markets?

No. There wasn't that much movement in UK stocks, and I don't buy USA stocks. Whatever the outcome, I am still well ahead on selling when I did, despite the bounces and rollbacks.

My prediction is, as it was previously, markets will fall into the Summer. Although Trump has rolled a lot of his tariffs back, there are onlging threats of more/different tariffs, and there are still the considerable tariffs on aluminium, steel and cars (25%) that will have knock-on effects, albeit at a slower rate.

[stevensfo]

One of the most obvious examples of market manipulation you’ll ever see. It is what it is.
The Nasdaq behaving like a micro cap

One might surmise that the whole thing has been about market manipulation - the Independent apparently reported that Trump was boasting about how many people in the room made money trading… after he'd rowed back the tariffs.https://www.independent.co.uk/news/world/americas/us-politics/trump-billionaire-profits-dropped-tariffs-b2731386.html

I think it was so obvious that not many people bothered to point it out. Insider dealing has been going on since time began. Trump's inner circle and friends of friends have obviously made a fortune.

Steve

[Lootman]

One might surmise that the whole thing has been about market manipulation - the Independent apparently reported that Trump was boasting about how many people in the room made money trading… after he'd rowed back the tariffs.https://www.independent.co.uk/news/world/americas/us-politics/trump-billionaire-profits-dropped-tariffs-b2731386.html

I think it was so obvious that not many people bothered to point it out. Insider dealing has been going on since time began. Trump's inner circle and friends of friends have obviously made a fortune.

Although if it was really just a deliberate set-up to roil the market and then profit from the rebound, then surely the more perceptive market participants would have seen signs of that. There are market traders who spend all day looking at unusual trading volumes in the options market, which is where such bets are usually made.

[jabberwocky]

Although if it was really just a deliberate set-up to roil the market and then profit from the rebound, then surely the more perceptive market participants would have seen signs of that. There are market traders who spend all day looking at unusual trading volumes in the options market, which is where such bets are usually made.

Perhaps I overstate it, it is insider trading rather than market manipulation. Clearly there was discussion about Agent Orange initiating a 90 day pause – because that leaked into the public domain, and was denied by the government of the USA – so some group of people obviously had prior warning. You also have Agent Orange's post on social media, prior to the official announcement, that it was "a great dday to buy".

As someone with no insider knowledge, and observing that Agent Orange thinks he can do whatever he likes, and seems not to care about the immediate consequences, I did not, and still would not, take a punt on reduced prices. On the other hand, Agent Orange's views seeem to change with the wind – but I think I still would not take a punt betting on those mercurial tendancies.

[Sorcery]

Good thread, there are a lot of good suggestions and ideas here. Read it all again from the start today.

I have not bought or sold anything since the close on Wednesday April 2nd. I too have been contemplating thinking of selling up some of my shares. Thought it would be better to put some numbers first on where my losses are.
My spreadsheet also contains the same details of the shares sold as bought, once sold they are moved to a different section of the spreadsheet.

Shares sold this year, inside tech sector sample size 11, average loss 7.85%
Shares sold this year, outside tech sector sample size 17, average loss 4.82%

Shares currently owned, inside tech sector sample size 12, average loss 10.2%
Shares currently owned, outside tech sector sample size 39, average loss 5.69%

Seems tech is more volatile and this is reflected in the losses. Lack of dividends in Tech sector may also be a factor. All losses are measured from the close on Wednesday 2nd April to the Thursday close before the Easter break.

I agree that in bear markets, dividends are a useful way of drip feeding funds back into the market. It's why I can risk putting all my capital (less 2% held back for emergencies) into the market. You have to pay tax on dividends just about everywhere, or even twice in the case of investing in US shares from where I live. The UK isn't better when you are paying the top rate of tax though.

Still not settled on whether to sell a chunk.

[Sirius]

My "relatively passive" accounts (ie my wife's ) have been mostly in MAN DYNAMIC IH ("Mandy")
see hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/m/man-dynamic-income-class-i-h-accumulation/charts
I hope you can see it, I'm unable to post images (Yet?).
I sold when it started not returning its 0.05% per day - it was sort of wobbling, then went below zero for the first time in months or years, so I only dipped a couple of percent. I'd been popping a bit in flat sectors which can do well l ( SPY, SOXL, XLF, GLD,KWE) and selling when they appeared to be at a peak, just on a std deviation from the trend (like Bollinger band) sort of thing. So, 12months to date it's at 30% or so.
The MAN fund dipped about 4-5% I think, but it looks like it might be getting back to normal now that Orange has stopped rattling the bond market. I hope! I'll get out again a couple of days before the end of the 90days of delay to the global tariffs somes round.

The growth of that fund is good, compared with index funds. I assume it uses derivatives to keep the performance up. I'm currently using Money Market, but if/when Mandy behaves, that's where I'll be.
We have 40k to stick in a new ISA or add to others, so it'll be at AJB or ii.

I trade daily. I've seen a couple of things drop like a rock, but not that fund, yet.
The only snag is that it's the only fund I've found which behaves as smoothly and well. It's available at HL, AJB, ii, etc.


Any comments would be welcome, I'm a beginner.