The Lemon Fool

At the moment the prognosis for the ftse index does not look great with the uncertainties of Brexit. The US indecies also seem to be suffering from poor political decisions. The DAX has a trend downwards. Although guessing what markets will do is very difficult, if not a lottery, it would be perverse to ignore such obvious warnings where things can go down but not up. Therefore I not keen about investing at the moment. However, are there any parts of the world which may be more immune from these problems eg consider Pacific Trackers? Does anyone have any insights at all please?

Goderich wrote: Does anyone have any insights at all please?

I work on the basis that nobody knows anything very much, including so-called experts, and invest accordingly. That doesn't mean we should totally ignore a growing consensus that some or all markets may be topping. In circumstances like this I would tend to cost average my investment over a long period. You may not get the optimum outcome from monthly buys but I find it gives peace of mind. My aims are modest but over the years the returns have been excellent.

Most importantly, I am sure that you are going to be asked questions about the aims of your portfolio such as the likely duration, need for dividends, risk tolerance etc. They all reflect potential suggestions.

TP2

Not sure I agree with your prognosis.

Brexit might or might not be bad for Britain. But whatever the outcome, IMO it will have relatively little effect on the global giants which make up the FTSE100. Currently brexit uncertainty is priced in. The market hates uncertainty. Once a brexit decision is made, whatever the outcome, I would expect the FTSE to bounce back. (Although of course, the sterling bounce might be bigger than the stock bounce)

Trump's US/China trade war might really damage both US and Asian stocks. If anything, I'd say that's the biggest risk to the global economy at this moment.

Italian sovereign debt is still a big worry for the eurozone, despite the fact it has been pushed out of our news recently. It's still there. It is not being tackled by their current govt. It's not getting any better. For the eurozone, Brexit is a hiccup by comparison.

FTSE100 PE ratio currently 16. Which is below long term average (20).
DAX30 PE ratio <14, which looks very cheap (avg 20).
S&P PE ratio is 20. Which is still a little below their historical norms (24 for US).
(Data from bloomberg)

My conclusion: If anything stocks are still cheap. Short term there may be some risks. But long term there's more upside than down. Germany looks real cheap. Just avoid the banks

Gryff

I think the major risk to the UK stockmarket is a Corbyn government, not Brexit.

The PE of the FT100 is so affected by swings in cyclical industries profits (Oil and mining in particular), not to mention the creative accounting of pharma companies who exclude all the bad stuff from their eps, that I'm really not sure the overall PE of the FTSE means very much!

I think the rise in yields seen in the US treasuries market is significant. Inflation is coming! The bond market has always been a far more sophisticated place than the equity market. When it talks I listen.

UK stockmarket will drop on a Brexit deal only because Sterling will rise. I feel sterling is not far off it's 'no deal' fair value.

For me, it is to keep buying quality equities at a fair price......where is that Smithson list!

I believe that the greater the uncertainty, the greater the long-term rewards. At the moment, the FTSE 100 is relatively weak and offers fair value.

Of course it could go lower, but a purchase now is very far from the crazy valuation in early 2000 just before the bursting of the Internet Bubble.

China is my concern.

Its size now means it is like the US in that if it sneezes everyone catches a cold.

Why did JLR sell nearly 50% fewer cars in China last month? That is a massive change and I don't believe the US-China trade war is a strong enough reason for this. The Chinese have been on a debt binge for years and at some point this has to slow down and it is picking up this turning point.

I am mindful that it was a small snippet of information that highlighted the problems in interbank lending that led to the GFC. Is this JLR sales drop a sneeze?

gryffron wrote:S&P PE ratio is 20. Which is still a little below their historical norms (24 for US).

The current Shiller P/E for the S&P 500 (i.e. the cyclically adjusted price/earnings ratio, or CAPE) is 31, almost double the average.

flyer61 wrote:I think the rise in yields seen in the US treasuries market is significant. Inflation is coming!

The US has led developed markets in their recovery from the financial crash's aftermath: US balance sheets were repaired sooner, US stocks sustained break outs to post-crash highs earlier, and US central bankers commenced monetary policy normalization ahead of elsewhere.

Around two years ago, US stocks began transitioning from an interest rate-driven to an earnings-driven bull market as investors began weaning themselves off nearly a decade of ultra-cheap money.

Regarding inflation and stocks, it's the nature of any coming wage inflation that'll be key: whether and to what extent the demand/revenue impetus from rising wages is able to offset the margin pressures created by those higher wages. ie. will corporate earnings continue to rise despite(/because of) wage inflation?

No one knows. As far as anyone knows, all the imponderables are reflected in the prices. Lars Kroijer's simple approach of just buying a world tracker has a lot to recommend it. You will only have about 6% of your money invested in the UK, so if things turn sour here you will not be too hard hit. If things go well here, you should be OK anyway, so it does not matter if it would have been better to have more invested at home. You can buy a bit at a time if you are worried.

The thing which I wonder about is when the S&P500 will crash next. The Trump effect and tax cuts seem to have talked it up massively in the last 18 months (30% or so I was led to believe).

But surely US enterprises have not become 30% more efficient, or built 30% more factories. It seems like pie in the sky to me. Surely that is more worrying than the FTSE?

Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

MrUnsure wrote:Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

What about dividends? Or buying cheap and selling after a 30% capital gain achieved in a matter of months?

TheMotorcycleBoy wrote:

MrUnsure wrote:Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

What about dividends? Or buying cheap and selling after a 30% capital gain achieved in a matter of months?

Yes, there are dividends but UK property, FTSE 250 or S&P 500 would have been far better choices over that period. Not sure about "buying cheap" as you don't know when it is "cheap".

MrUnsure wrote:

TheMotorcycleBoy wrote:

MrUnsure wrote:Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

What about dividends? Or buying cheap and selling after a 30% capital gain achieved in a matter of months?

Yes, there are dividends but UK property, FTSE 250 or S&P 500 would have been far better choices over that period. Not sure about "buying cheap" as you don't know when it is "cheap".

I'm sure you are right MrU.

With the buying cheap I jus meant doing the pyad-stylie analysis then buying and waiting for a gain.....or speculating on momentum.....but sure there's risk there too.

MrUnsure wrote:Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

The FTSE100 then was nothing like it is today. Look at the enduring shares and see how they have done. Look at the FTSE350HY and compare that.

Don't forget that trackers only do what it says on the tin. By property do you mean bricks and mortar or property companies, now REITS?

TJH

tjh290633 wrote:

MrUnsure wrote:Is the FTSE 100 still a market worth investing in? In the 20 years that I've been investing, the FTSE 100 has gone nowhere. I was sucked in by the Motley Fool UK Investment Guide and chose stocks over property, which has clearly been a very bad choice.

The FTSE100 then was nothing like it is today. Look at the enduring shares and see how they have done. Look at the FTSE350HY and compare that.

Don't forget that trackers only do what it says on the tin. By property do you mean bricks and mortar or property companies, now REITS?

TJH

I haven't considered property companies - that has made me think. I bought a small flat in 1997 which is now worth about 4-5 times what I paid. I was wary about buying something bigger or buying to let because I was worried of a repeat of the 80s property crash, and I had just discovered the Fool so I was totally committed to share investing. I now regret that decision.