Report on Q1 2019

2 Apr 2019

In the Q4 report I listed all the reasons (far too boring to repeat) why the stock market had fallen in those three months. Then I asked:

Yet here we are in January 2019 and are any of the alarming headlines remotely surprising?

That was a rhetorical question and I listed seven shares that I was trying to buy on weak days. Since 31st December, two of them (Halfords and Victrex) are down but on average the selection rose by 13%, greatly helped by the fact that Dairy Crest, which I tipped on 4th February, received a takeover bid less than three weeks later. As ever, judgement + luck = success.

The UK indices had a good quarter, rising by c.9%. Given the general nervousness, which has been reflected in the bond markets, I am surprised that the FTSE 100 (+8.4%) slightly underperformed the more domestically focused FTSE 250 (+9.2%).

In the end, perhaps the biggest story of the quarter was the return of 10 year German Bund yields to negative territory, for the second time ever and the first time since the summer of 2016. It is true that GDP forecasts of most developed nations have fallen recently but a negative yield on Europe’s reference government bond implies something more than cautious economic forecasting. It smells of fear.

Perhaps by the end of Q2 we will be able to guess what people were worrying about.

Finally, a quick comment on UK politics. In the middle of March I had a bet (that’s a gamble, not an investment) that the next general election will be this year. At the time the odds were 11/8 against. Today they are 8/11 on, implying a greater than 50% chance. A Labour government led by J Corbyn and J McDonnell is one of the most obvious risks to our incomes and our assets. These guys are dangerous and if elected they will move quickly. My personal threat level is standing at orange.