menu

Portfolio Positioning For Brexit Vote

lse:vod
lse:bta
lse:hsba
lse:lloy

#342

True, but, when was the last time the S&P 500 rose 280 points in 12 sessions?


#343

I know I’m not doing technical analysis like you guys but what has changed?

No US/China deal, Brexit turmoil default position still No Deal after 15th vote, totally split parliament & more companies reported a slowdown, many more!

Right now i feel I’ve missed the low whilst at the same time wondering why it’s rising.
Yet, I think it’s crazy political news moving sp’s north without justification imop.

Of course I am amateur time.


#344

Tend to agree… but as you also say it’s unlikely to happen (yet).


#345

News events like this affect FX pairs though which I know you have an interest in… so well worth having a plan ahead of time and choosing expiration/strike ready to place your orders.


#346

Hi JW

Excellent question but very difficult to answer.
Assuming the vote goes through, which I have doubts about, possibly the market temporarily moves up a bit. Some uncertainty removed.

However I think that after any spike if it happens will be sold in to.

I am making the possibly incorrect assumption that if May s deal is voted for, we leave the EU ?
That then will pose questions as to how the UK fares outside the EU, therefor bringing back uncertainty.

Whatever happens, it will be a volatile day for markets.

ATB

soi


#347

Yes, correct… and then remember we’ve got a few years of negotiating the future trade deal/relationship… which will also bring some volatility you’d have thought.


#348

You’ve not missed anything Swamp , An entry price is meaningless/irrelevant , Its the exit price that is important.
Take the emotion out of trading…Paid XXX and Made XXX is all that pays the bills.

Have a look at Flybe today after closing yesterday at 16p…That’s a painful position , Not sitting in cash on the side lines , Pick yourself up and keep watching and learning.


#349

Hi SC,

Mindful that markets frequently get oversold & overbought mostly on sentiment & typical herd behaviour, what seems apparent is that certain macro-factors are seeing shifts in perception. Risks of a no-deal Brexit appear to be receding somewhat. IMO, the scale of the previous falls across the FTSE were pricing that in. Hence even UK banks may have bottomed out, though that’s not 100% certain.

Elsewhere, previous fears of Trump’s trade wars with China escalating & perhaps causing major carnage across global markets also seemed overdone & oversold mostly on sentiment, as I thought (& wrote) at the time. Now we’re seeing some upward rebalancing across markets. But how long it lasts for is another question altogether as a lot of uncertainty persists.

FWIW, I continue to hold & book gains as available. That’s all I can control 100%. Everything else has too many variables in the short-term. - Regards & GL.

PS: Really hope you get a favourable response & at least some compensation from X-O.


#351

Firstly I’d like to thank everyone who has contributed to this discussion topic as although people have different views they express them without rancour or disrespect and focus on the topic in hand. Clearly some people trade frequently so I can see why current political issues (e.g. the Brexit vote) are of genuine concern to them but others trade rarely and take a longer view. I’m in the latter group and hold shares in about 20 companies mainly in a SIPP but also in an ISA. My aim is to provide an eventual income from the natural yield rather than having to draw down on capital. Currently whilst I am still earning I reinvest all the income which increases each year. For that reason I am happy to ignore short-term fluctuations as it seems very difficult (impossible) to determine what the Trump/Brexit etc, etc. effects will be.

I’ve been investing for a long time (since the 1970s) and am seeing something that I’ve never really seen before. The majority of my holdings are FTSE 100 companies and many are currently giving a yield of between 5 and 7% (some even higher). Until the past few years the yield on shares was always lower than that of bonds and the interest rate of building society saving accounts etc… It was also generally lower than the rate of inflation. This has now completely turned around. The question is what will happen in the future? As I see it, unless this situation continues for the foreseeable future which seems unlikely, there are really three likely possibilities.

  1. We enter a depression and even good solid companies will struggle to maintain earnings so that they are forced to cut their dividends.

  2. The price of the shares will increase significantly so that the yield will fall more into line with the yield from other types of investments.

  3. Inflation will really take off and a yield of 5-7% from shares will be small compared to the overall inflation rate.

I’d be interested to hear your views on this. Maybe there are other possibilities? My own personal view is that if you are a long term investor many FTSE 100 companies now offer an almost ‘once in a lifetime’ value, i.e. I tend to favour the second possibility.


#352

I agree. My FX dealings are only really Sterling/EUR. FX is much less liquid than indices hence more susceptible to news. That said 1.148 - 1.152 has been a brick wall for Sterling for all of last year. My approach is to check Forex Factory for economic releases and then trade only pa, with a volume profile overlay. If the data is a grade 1 announcement e.g. non farms or FOMC announcement, then, I will not trade for 2 hours. Other data such as Philly Fed, Michigan, Jolts, I will allow 15mins to elapse. The rest is entertainment to me. Random news is just a cost of doing business (what Stops are for). Obviously when Trump was tweeting, last February, one has to accept the characteristic of the market has changed.


#353

Yep… was interesting watching USD rates moving as Jerome Powell was speaking at the Economic Forum yesterday… though that’s not something I would trade on tbh… but on major anticipated events I will take a currency position.


#354

You could also look more widely at companies on other exchanges assuming your ISA/SIPP provider/s allow you to do that… LSE isn’t the only exchange out there.
Depends how much time you have to some extent/whether you want to have a portfolio you just sit back and watch… whilst you’re working/earning.


#355

Hi JohnGeoff, It is nice to hear some kind words and an acknowledgement that we all have different timeframes and risk tolerance levels.

Firstly, let me say, I think much of the bad news on Brexit is factored into the market. The problem many people have, is that, what was said a year ago: UK shares are cheap, applies today. It seems, last year no one was interested in buying yield. On that basis, I would argue that, the shares, like, Lloyds, offer much greater value now than this time last year. Bake into to that we have had a significant correction in December, it then follows, that now is a decent entry point. The big question, in my view, is that of opportunity cost. Do you want to be exposed largely to the FTSE or would it be better to diversify? Let me state my two problems with the FTSE. Firstly Sterling has been decimated since the Brexit vote and has failed to rally. The SoC (Scene of Crime) was 1.355 EUR. I don’t think we will ever reach that level again. Secondly, much of the UK economy is based on residential property. When property prices fall, people just stop spending money. You have seen what has happened to top end property values in London. I think the ripple effect could last a number of years, and Carney’s prediction of a 30% correction is realistic.

I think, if I were you, I would hold 30% cash and hold my favoured high yielded. I would consider diversifying some of my portfolio out of the UK. I like the Canadian infrastructure company Brookfield.

Regards

McB


#356

Hi JohnGeoff,

Thanks for some very well-considered comments. I agree with much of it.

IMHO, for the foreseeable future at least, political & economic macro-factors in the UK are likely to remain most uncertain. Too many variables exist, even if there’s a Brexit deal. Whilst worst-case projections of a protracted recession isn’t a given & may be avoided, I have growing concerns about the weakness of UK’s government, over-inflated housing markets, spiralling personal debt, et al. These collectively seem likely to fuel further extreme volatility across the FTSE.

I’ll clarify that I’m not a L/T investor, but I agree with you for much longer-term. Even from a technical angle, a lot of FTSE stocks are near longer-term support levels, with some having tested support & bounced since. So I agree that for more patient holders content to pick up yield, whilst riding out further volatility until SP values recover, seeing further significant upside later is very likely.

For LLOY’s post-PPI & Brexit, at least a return to retest resistance at 73+ seems doable. If breaking that, then a gradual climb to the 80s & a test of circa 89 L/T resistance. However, I’d not put a timeframe on it.

FWIW, I intend to continue holding all I have until profit targets seen. My biggest hold remains LLOY.
However, I also want to build a bigger cash position as opportunity allows as I feel that UK’s political situation has rarely been more vulnerable to seismic shocks. Almost anything could happen come the next GE. - Regards & GL.


#357

Just briefly, Brookfield Property Partners (BPR) is a NYSE listed REIT that focuses on commercial retail property. It yields over 8% and is trading at a discount to NAV. I like it a lot


#358

Many thanks to those who responded to my last post. Interesting that two of you effectively advised a more global approach. In fact I’ve been doing this anyway. I hold JRS (a Russian Investment trust), and some individual US shares e.g. VZ. It is true that some FTSE 100 companies I hold operate pretty much only in the UK, e.g. LLOY, UU, BLND and TW. (although TW. does have some operations in Spain) but all the rest are truly global, e.g. AV., GSK, HSBA, RIO, RDSB, SLA and VOD. I also hold NG. which virtually has a monopoly in the UK but also has a sizeable operation in the USA. Some of these FTSE 100 companies even base their dividends in US$ (HSBA, RDSB and RTZ) or Euros (VOD). Two FTSE 250 companies I hold that are truly global and have served me well are CKN and VSVS.

Macbonzo – thanks for the heads up on BPR. It looks well worth following and can be held in my SIPP/ISA as I have a W-8BEN. I see from its October newsletter that as part of its global portfolio it is currently developing 2,500 residential apartments in London, the first of which should deliver rental income in 2019.


#359

Hi JG,

I too have been rebalancing my portfolio towards overseas investments in Europe, India and the US since the referendum.

Cheers,

Frog


#360

Hi @JohnGeoff,

Welcome !. Good to have a new contributor.

Are UK shares undervalued you ask, well I have read a few articles on this which seem to vary from “well undervalued” to “about fair value” at this time. Considering the level of the FTSE 100 over the years myself (and a work colleague who was also an investor) formed a view that the FTSE 100 always had a current “top” and any move above that figure brought the risk that the market would pullback, possibly significantly. Over the years that top started at ~6000 around 2010, it then moved up to around 6700 around 2014 and right now I would say it is around ~7700. So the top is moving up, likely with inflation, which may have moved it up further by now - though 7700 is quite a recent top. So I think that any upward move in the FTSE is likely limited to 10-15%, just a personal view you understand.

Inflation is a big worry, especially to those such as myself who are no longer working. When I was young inflation was a boon, as long as my salary kept pace then the size of my mortgage became hugely less significant over time. Of course now I don’t have a mortgage, but I don’t have any earned income either which makes capital preservation an important issue for me and has been the major motivation for much of what I have been doing with my portfolio towards the end of 2018. I was concerned that we might be entering a recession and that a big downward correction in the FTSE was a distinct possibility. Events at the start of 2019 have to an extent dispelled some of those fears, though brexit is still a significant threat or hopefully an opportunity !.

You are clearly comfortable investing in many individual stocks. However many FTSE stocks have seen significant falls of over 10% and sometimes more than that eg INTU and RMG for example. VOD and TW. (and indeed all of the housebuilders) are down big time due to the brexit threat. NG has been hammered by the Corbyn threat. KIE by the threat of being the next Carillion. Personally I have elected to try and avoid these perils by investing only in a very limited selection of single stocks and outside that to invest only in Investment Trusts and ETFs. This has been a major change to my portfolio this year, I now have only around 30 holdings down from over 50 a while back.

I would agree with others comments on the desirability of investing globally – I have quite a number of overseas holdings but all as ITs or ETFs. My brokers overseas currency charges make investing directly in overseas stocks expensive as they make a 1% currency exchange commission charge on any purchase or sale involving a foreign currency. Also personally I have no love of investing in anything in the USA due to the crazy volatility of their markets – but that’s just me !.

ATB

Pref


#361

Just out of interest Pref, which of your high yielding ETFs have you found a) least impacted by various Brexit related news and b) that takes largest hit on ‘bad’ Brexit news?

I can guess… but just wondering if you’ve already charted this?


#362

Hi @J_Westlock ,

Well I knocked up 2 comparison charts as follows:-

3 Months

6 months

Red - SEDY
Green - IAPD
Blue -ZWUK
Purple - ZWEU
Yellow - IUKD

SEDY & IAPD Asia / EM have performed the best, and are actually up a bit.
ZWUK & ZWEU have performed very similarly.
IUKD has performed the worst as it was badly damaged due to holding both KIE & INTU which suffered major falls at the end of the year.

I am holding 50% of what I want in SEDY, IAPD. I just bought what I want in terms of ZWEU the other day. Looking to buy back the rest of SEDY & IAPD, plus a full sized holding of ZWUK and IUKD which both have tasty 6%+ yields if they fall this week.

And in truth probably even if they DONT fall I will still buy this week.

ATB

Pref

PS Not sure that there is a specific BREXIT effect on any of them really, other than through the whole market being pushed down. I guess the lack of that effect is what has made SEDY & IAPD perform better.

PPS Of course these charts just reflect the share price. All of these ETFs have yielded high 5.x% and in some cases over 6% in the last year. So for overall return over 6 months for example you need to add say 3% to the charted figure.