@AximUser There seems to be a dichotomy at the moment between those who think the worst is yet to come and those who think it's behind us. Half the coverage is optimistic and the other half pessimistic. I've not seen it like this for a
long time. I have to admit to being in the pessimistic camp. Ignoring covid, we've gone since 2009 without a recession in an environment of out of control Quantitative easing and free money - and the market has only started having its withdrawal tantrum over that. They aren't going to let the loss of virtually free money leverage go quietly. More taper tantrums are coming I am sure and once the FED/BoE don't bring down interest rates as fast as they would like, further tantrums will follow. Whether the US can avoid recession is a coin flip, but either way it will hurt earnings. Especially once this AI bubble pops and everyone realises that the S&P 500 is being artificially held-high by misplaced euphoria.
UK markets are a mess. We've had 40 years of economic decay trying to protect nothing in our economy aside from banking, while at the same time our banks have become so inward, insular and irrelevant that there is no real prospect of our banks finding any growth any more. We've lost all of them from the top list apart from HSBC and Xi is attempting to force the board to repatriate it to Hong Kong. The UK market has never recovered from 2008, the US dragged us down the plug hole with its toxic, deregulated lending practices and it exposed gross structural inadequacies in our economy that was too over dependent on the synthetic veneer of our finance sector. The absolute saddest thing is that in the intervening 15 years, no government has ever even attempted to being the process of fixing it. It's been the same conservative party in power and they have only one idea. The outdated delusion that they can turn the country into an economic power house by becoming a tax haven, neigh zero tax economy. Despite the damage that Truss's 1.5 months in government did to our government debt yields having attempted to borrow £66b to fund a tax cut for those on the highest income tax bracket, they have so little else to reply on and are becoming so desperate in the face of cataclysmic opinion polls, that today they've announced that they are going to abolish inheritance tax.
(
https://www.theguardian.com/politics/2023/jul/15/no-10-reportedly-in-talks-about-scrapping-inheritance-tax ). Genius.
The UK has a great innovation culture, but we have stalled for the last 50 years at making internationally relevant companies, instead we have lazily slipped into a culture of cashing out, one that sees cashing out as some how an achievement. So we sell everything to the lowest bidder. We've failed to invest in training for 50 years, have one of the worst R&D investment ratios in the developed world because the failed financial system has decided that productivity is unnecessary and that the UK's "niche" in stocks is to have super high dividend yields. Yeah, it's true, if you're a dividend investor, you cannot go wrong in the UK economy. Yet while they're haemorrhaging money to you under the pretence that this is a wonderful thing, they aren't investing in anything. You can get a 6% dividend out of the FTSE at the moment... but the growth will have been nearly flat for the last 12-13 years.
I use a couple £k of WUKD as a automatic tap to pay off my brokerage fees via its dividend. I only need about 3.5% to cover fees and it is getting over 6% without any real leverage or exposure risk at all... but look at the growth curve -
https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P00016RXO
Now, it's not fair of morningstar to compare it to the FTSE AllShare because it's not an AllShare tracker, it's a AllShare dividend aristocrat tracker - but there isn't an index for that. That said, the red line on their chart is basically horizontal save for the 2022 dip when Truss tried to loan that £66b and the Queen died. The UK economy has been like this for a decade.
That said, if we get a change of government next year, if they try something new. UK companies P/E ratios are microscopic compared to those in the USA. Anyone willing to ride that out, who believes that the UK government can turn the economy back around should see significant gains as we not only have a long way to catch up, but have the potential to do extremely well. If you are a dividend investor, then we're still #1.
Today, I won't touch the S&P 500 at the moment. I don't believe in this AI bubble. The only way I would invest in the S&P 500 at the moment would be via an Equal Weight fund, something like
XZEW /
XZES which are telling the truth of the S&P 500 at the moment. It's flat lined, but at least you don't get stung by the AI bubble when NVidia etc's P/E's are forced back to median.
The only market that is more expensive than the US at the moment is - as discussed on the previous page - India. P/E's always revert to the mean, so unless you're looking to do some day trading, I'm inclined to deposit elsewhere for a bit. The CAPE and Excess CAPE are showing the same.
Gold is way over valued, why it is still going up is a baffling mystery. It tells of the 50% of us soothsayers who see a bear market for the rest of the year.
With profound advice like that, no wonder Credit Suisse did so well! Oh... wait!
