Friday has swung through rather quickly, it feels; I must be having far too much fun! And then, to top it all off, I have the pleasure of conversing with you all. So, settle down and prepare your senses for this week’s News, Views and Truths.
2019 is the Chinese Year of the Pig. The Pig is the twelfth of all zodiac animals; according to one myth, the Jade Emperor said the order would be decided by the order in which they arrived to his party. Pig was late because he overslept. Another story says that a wolf destroyed his house and he had to rebuild his home before he could set off. When he arrived, he was the last one and could only take twelfth place. Either way, poor pig.
From my perspective, 2019 to date could certainly be viewed as the ‘Year of the Investor’. It has been much more difficult to lose money than it has to gain, with all traditional asset classes up and by up, I mean UP.
The chart above shows the 2019 Year to Date performance of the two broadest indices out there; the MSCI World Equity Index and the Bloomberg Global Aggregate Bond Index; essentially the two sides of the same coin.
If you are an adventurous investor, piling into equities over the longer term with the tolerance to short term market fluctuations, you are happy. On the flip side, if you are a cautious investor, with the majority of your assets in fixed income securities, you are dining out. For the vast majority in the middle, you have the best of both worlds.
And closer to home, the story repeats. UK assets have reacted in a very similar fashion. What a great time to be an investor! Despite Brexit.
Yet, equities continue to take all the headlines. Investors focus upon that particular asset class as it can offer the greatest reward, with the commensurate level of risk, naturally.
However, like the Pig, late to the party because some bloody wolf has levelled his house, investors should not ignore bonds. The problem is, if you read the industry press, you would see that many, and most, market participants were, and continue to be, vehemently anti-fixed income, carrying massive underweights and piling full tilt into equities.
When discussing this with their clients, their 2019 Year to Date charts show that their decision was unequivocally correct; value added for those fees charged.
However, a picture can paint a thousand words. Stretch the chart out to 12 months and you get a completely different narrative.
The above is 12 months; the FTSE All Share, Gilts and UK Corporate Bonds. We know that 2019 has been a great year for Equities, but taking into consideration the Q4 2018 global equity market correction, if you followed the herd and lumped it all on equities, you would be behind to the tune of 10%.
And all of this comes back to the only game in town; diversification. Real, meaningful, careful diversification. The piecing together of various assets, all moving in different ways, yet providing you, the investor, with a return in line with your financial goals, over the longer term. So, don’t be persuaded by the headlines to casino invest; it’s not all black or red. Back the house instead.
Year of the Pig? I’d say 2019 is the Year of the Bond.
And on that note, our usual playlist. Can you guess the theme? See you next week!