With all the doom and gloom in the papers about the inheritance the Conservatives have left Labour, the Autumn Budget uncertainty, alarming national debt levels and a recent sharp drop in consumer confidence, you’d be forgiven for missing the fact that the British Pound, versus the US Dollar, is trading at its highest in two and a half years!
Last weekend, I took part in a charity cycle ride from London to Amsterdam, to raise money for Thomson House School, based in South-West London.
For those who don’t know, my wife is American and each summer we and the kids spend time in North Carolina in the US, visiting family. Also, for those who don’t know, Raymond James is predominantly a US company, founded in 1962 and a public company listed in the US since 1983. UK operations only commenced in 2001.
Part of our mission at Raymond James, Richmond is to make investing and finance accessible to all. We make sure we communicate with you in ways that go beyond general statements and bland marketing emails. That’s why we’re out in the local community, telling people how we can add value and assist clients with their finances and investments. On June 15th, we were at Thomson House School Summer Fair, in East Sheen, meeting parents and teachers alike, discussing the value of investing in clear, simple language.
It’s all about Artificial Intelligence!!
Further evidence of the snowballing investor interest in Artificial Intelligence came from our recent Raymond James Forum, held on 17th & 18th June, where a series of investor seminars were held. The most popular one appeared to be put on by T. Rowe Price: Generative Artificial Intelligence: The most important innovation since electricity?
The leading UK share index has just done something it has only done once before since 1984 – that is, 12 closing all-time highs in any rolling one-month period. The last time this happened was in January 2017.
‘Exuberance’ and ‘UK shares’ have rarely been mentioned in the same sentence for many years now. As the chart below shows, even with dividends reinvested, the MSCI United Kingdom index (black line) has significantly underperformed the US S&P 500 (red line) over the past ten years even with dividends reinvested!
Shares that make up a market index, such as the leading 100 share index in the UK, don’t all move together in unison on any given day. The headline index simply tells you at the end of the day what the average move of all the stocks were. But look under the hood, there are generally always stocks moving up or down in price.
Companies in an index are also different sizes – some are very large companies and others are small in comparison. However, very large stocks will have a big influence on the direction of an index. For example, according to MSCI, the top ten companies of the leading UK 100 share index account for just over 48%. This is a very high concentration – as the other 90 shares make up the rest. What happens to these ten companies is therefore vital to investors in this market.
Recently, there have been a number of articles from various sources, all with the same message – avoid Chinese and Hong Kong equities. These articles have cited that valuations of equities in these regions are ‘very low’ but there is no investor appetite to invest in these and therefore there is no certainty of stock market recoveries.
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The value of investments, and the income derived from them, can fall as well as rise. You may get back less than invested. Past performance is not a reliable guide to future returns.