BREXIT is so old hat. The furore surrounding the High Court decision on Thursday to prevent our Government from Triggering Article 50 without the full and considered input of Parliament, is now approaching ludicrous levels. It is becoming an embarrassment, and if it weren’t so darn entertaining I’d be furious! Speaking of the ludicrous and entertaining, this coming week marks the culmination of months of frenetic, frequently bizarre political campaigning from both the Republican and Democratic presidential candidates for the US Election.
Thoughts on the US Election
I wrote last week about the impact Brexit should have on your investments, and throughout this past week the notion has still been rolling around in my head. What impact will the coming election have on markets, and specifically my investments? Should I be doing more to hedge myself against a potential fall in the FTSE?
I witnessed some very interesting debate on Twitter this week regarding this very suggestion. A number of people I follow decided to open short positions on the FTSE 100 during the week, or are intending to this coming week. How have they fared so far?
The FTSE 100 fell 4.33%, therefore they fared very well indeed! (No doubt the High Court decision, played some part, of course). I therefore ask myself: Should I have foreseen this? Would I have been wise to place a similar position?
In hindsight, yes I would.
Does this come down to lack of experience?
Quite possibly, yes it does.
Am I upset by this?
Not in the slightest.
One principle I am completely comfortable with is knowing what I don’t know. I have some limited experience placing short positions using technical indicators, and yes, it is an area I am interested in learning more about. But I know it isn’t a strong point for me. Likewise, I know it is all but impossible to predict the behaviour of markets, so I don’t even begin to try.
The core of my philosophy is about finding value. Looking for undervalued, or underappreciated companies or markets, regardless of location or political circumstance. I have foregone the opportunity to preserve my portfolio that little bit more, but I also understand that a week will not determine whether I am successful in the long-term.
Staying in Cash
One lesson I have learned from this week is that holding at least a reasonably significant cash position is a sensible idea. For a bargain hunter, one should always be ready to pounce should a bargain appear. Being fully invested at all times can, and has, proved a hindrance to me this week, as I would be more than happy to be topping up certain positions I currently hold, such as Gattaca PLC (GATC). Their preliminary results released this week appeared to me to be fairly strong, with improvements in revenue, earnings-per-share and a raise in the dividend (now approx. 7%). A warning on potential economic uncertainty sent the price down nearly 12% for the week, and whilst my investment is now approaching a 50% loss, I remain confident in the business and would be happy to add to my position.
The Coming Week
I have read opinions that the market has now priced in the possibility of a Trump win in the US election on Tuesday. The possibility therefore of an uplift in markets should Clinton win is an appealing one, and would certainly provide some much welcomed buoyancy to my portfolio. However I am at heart a long-term buy and hold investor. I understand that this past week, and even this week coming, will not be the determiner of my success.
My success will be down to continual refinement of my investing philosophy, principles and abilities. To the continual pursuit of knowledge and understanding. To reading anything and everything that will aid me, make me a better investor, and help me compound my wealth. Everything else is just noise.
Disclosure: Gattaca PLC is a constituent of the portfolio.