Portfolio advice

Linton

Hoenir said:

InvesterJones said:

Hoenir said:

If one had an appropriate portfolio risk then events like those across the pond (which are not actually extraordinary) are already factored in.

Never experienced anything of this magnitude in my investing lifetime. Where the President of the USA rewrites global trading rules on a whim every few days. Who'd want to run a business in such an environment. Corporate world requires stability to operate to the best of it's ability.  

You don't think events like the global financial crisis, dot.com bust, covid pandemic, have been at least as market moving?

Trump at a stroke has undermined the entire global trading system that has existed since the end of WW2.  At least with the GFC and Covid there was a coordinatated approach at the Global level to the fundamental issues and challenges posed. The US has benefited from the early 90's from globalisation of trade. Also in terms of the capital inflows.  The next 30 years are unlikely to see the US treated in the same manner. The one thing the Trump administration cannot control is the international bond markets. Noticiable how the flip flopping in policy comes when the 10 year Treasury Bond yield is rising. This determines the borrowing rate for Americans in their everyday lives. Scott Bessent knows how critical this is. The White House has no interest in the flutuations of the stock market. 

Markets are driven by a mixture of emotion, sentiment and money.  Hence why over many decades I've refrained from buying whole markets per se. With a background in corporate finance my gut tells me that if something is too good to be true as it probably is. Many ways to meet ones own objectives by maintaining a risk adjusted portfolio. Danger with bear markets. Isn't the immediate correction. It's how long the recovery takes to reach the previous high. 

Trump has undermined the US's trade with the rest of the world.  But the rest of the world is happily trading amongst themselves, buying, selling and making profits.  When you buy things in your local high street shops, supermarkets or on-line how many US sourced goods do you see?

Think globally and dont focus on the US.  The same fall in global economic dominance that happened in the UK in the first half of the last century appears to be now happening to the US. So what, life and investing go on.  

Hoenir

Linton said:

Hoenir said:

InvesterJones said:

Hoenir said:

If one had an appropriate portfolio risk then events like those across the pond (which are not actually extraordinary) are already factored in.

Never experienced anything of this magnitude in my investing lifetime. Where the President of the USA rewrites global trading rules on a whim every few days. Who'd want to run a business in such an environment. Corporate world requires stability to operate to the best of it's ability.  

You don't think events like the global financial crisis, dot.com bust, covid pandemic, have been at least as market moving?

Trump at a stroke has undermined the entire global trading system that has existed since the end of WW2.  At least with the GFC and Covid there was a coordinatated approach at the Global level to the fundamental issues and challenges posed. The US has benefited from the early 90's from globalisation of trade. Also in terms of the capital inflows.  The next 30 years are unlikely to see the US treated in the same manner. The one thing the Trump administration cannot control is the international bond markets. Noticiable how the flip flopping in policy comes when the 10 year Treasury Bond yield is rising. This determines the borrowing rate for Americans in their everyday lives. Scott Bessent knows how critical this is. The White House has no interest in the flutuations of the stock market. 

Markets are driven by a mixture of emotion, sentiment and money.  Hence why over many decades I've refrained from buying whole markets per se. With a background in corporate finance my gut tells me that if something is too good to be true as it probably is. Many ways to meet ones own objectives by maintaining a risk adjusted portfolio. Danger with bear markets. Isn't the immediate correction. It's how long the recovery takes to reach the previous high. 

Trump has undermined the US's trade with the rest of the world.  But the rest of the world is happily trading amongst themselves, buying, selling and making profits.  When you buy things in your local high street shops, supermarkets or on-line how many US sourced goods do you see?

Think globally and dont focus on the US.  The same fall in global economic dominance that happened in the UK in the first half of the last century appears to be now happening to the US. So what, life and investing go on.  

Supply chains are global though. Globally companies make profits either directly or indirectly from what the Americans spend their money on. If the Americans buy less , travel less etc. Then profits will reduce.  

Remember wages in Asia and India are well below developed country levels. There's no large accesible markets for companies to sell into. 

I see no shortage of US companies in the UK. Who no doubt Trump will protect should they come under fire for the low rate of corporate tax they pay. 

With regards to the fall of the British Empire. There's the small matter of WW2.  No great surprise that as a whole Europe in particular struggled to recover given the enormous destruction inflicted and the subsequent rebuilding cost.  

chiang_mai

GeoffTF said:

chiang_mai said:

It is a fact that investment banks and others, frequently change their portfolio holdings, based on events. Such change can fairly be described as tactical risk reduction, I think. I'm sure that JPM, for example, has a far greater tolerance for risk than I do, along with far greater information on which to assess those risks and their probability. So really this is not about having greater skills, it's about an individual appetite or tolerance for risk. Some may view current events across the pond as business as usual and do nothing. Others, such as me, may take a different view and think the risk is too great, and as a consequence, adjust their holdings. Whether or not one approach is better  or more rewarding approach than the other, remains unclear to me.

Ignore JPM. They do not know the future and cannot beat the market either. They are spouting rubbish in the hope of persuading fools to buy their funds. The market knows that Trump is crazy and has already priced that in. Is Trump crazier than the market thinks? He may be or he may not be. Nobody knows.

You use the term, "beating the markets", as though the markets have this internal energy and direction that only they know and that nobody is ever able to successfully anticipate or adjust their portfolio in consideration of major current and future events. JPM and all the other large investment banks, along with all the retail investors, are the market, what they do determines market direction! 

At the risk of turning this into a political discussion, which I would hope to avoid at all costs, I do not know that markets think the US president is crazy and that is already priced in. I do know that many investors sold US assets and moved to alternate markets, in order to avoid the volatility in the US caused by the leaderships shenanigans. In that regard, lots of people changed their asset allocations, either temporarily or permanently. Was that a tactical reallocation? I think it was. Perhaps we should agree to disagree on this point and put it down to individual risk tolerance.

GeoffTF

chiang_mai said:

GeoffTF said:

chiang_mai said:

It is a fact that investment banks and others, frequently change their portfolio holdings, based on events. Such change can fairly be described as tactical risk reduction, I think. I'm sure that JPM, for example, has a far greater tolerance for risk than I do, along with far greater information on which to assess those risks and their probability. So really this is not about having greater skills, it's about an individual appetite or tolerance for risk. Some may view current events across the pond as business as usual and do nothing. Others, such as me, may take a different view and think the risk is too great, and as a consequence, adjust their holdings. Whether or not one approach is better  or more rewarding approach than the other, remains unclear to me.

Ignore JPM. They do not know the future and cannot beat the market either. They are spouting rubbish in the hope of persuading fools to buy their funds. The market knows that Trump is crazy and has already priced that in. Is Trump crazier than the market thinks? He may be or he may not be. Nobody knows.

I do know that many investors sold US assets and moved to alternate markets, in order to avoid the volatility in the US caused by the leaderships shenanigans. In that regard, lots of people changed their asset allocations, either temporarily or permanently. Was that a tactical reallocation? I think it was. Perhaps we should agree to disagree on this point and put it down to individual risk tolerance.

The correlation between the equity markets has been high and their volatility has been similar. Tactical reallocation? For every buyer there is a seller. Some investors have been spooked and sold at unfavourable prices. Those with cooler heads have got cheaper prices at their expense. Nonetheless, we do not know where the prices will go, but panic selling is not usually a good idea.

chiang_mai

GeoffTF said:

chiang_mai said:

GeoffTF said:

chiang_mai said:

It is a fact that investment banks and others, frequently change their portfolio holdings, based on events. Such change can fairly be described as tactical risk reduction, I think. I'm sure that JPM, for example, has a far greater tolerance for risk than I do, along with far greater information on which to assess those risks and their probability. So really this is not about having greater skills, it's about an individual appetite or tolerance for risk. Some may view current events across the pond as business as usual and do nothing. Others, such as me, may take a different view and think the risk is too great, and as a consequence, adjust their holdings. Whether or not one approach is better  or more rewarding approach than the other, remains unclear to me.

Ignore JPM. They do not know the future and cannot beat the market either. They are spouting rubbish in the hope of persuading fools to buy their funds. The market knows that Trump is crazy and has already priced that in. Is Trump crazier than the market thinks? He may be or he may not be. Nobody knows.

I do know that many investors sold US assets and moved to alternate markets, in order to avoid the volatility in the US caused by the leaderships shenanigans. In that regard, lots of people changed their asset allocations, either temporarily or permanently. Was that a tactical reallocation? I think it was. Perhaps we should agree to disagree on this point and put it down to individual risk tolerance.

The correlation between the equity markets has been high and their volatility has been similar. Tactical reallocation? For every buyer there is a seller. Some investors have been spooked and sold at unfavourable prices. Those with cooler heads have got cheaper prices at their expense. Nonetheless, we do not know where the prices will go, but panic selling is not usually a good idea.

Panic selling, as in doing things suddenly and without calm thought, is not a great idea, I agree. I can only speak for myself when I say that I considered events since the start of the year and decided that the time had come for me to reduce my US equities holdings and to transition to other markets, where I remain until today. I cannot imagine that I will ever return to 60% and that 35% is a likely future ceiling for me. For the time being I'm very comfortable with my 15%, it will take some major changes, proven over time, for me to want to increase that holding.

chiang_mai

For the benefit of anyone who is interested, linked below are some of the asset allocation reports by major banks and investment houses. If you read them all and compare, you'll see some common themes, you'll also see plenty of evidence of tactical responses to developing economic and political scenarios, some of which endure for several quarters. My point in this thread is, if the majors have tactical scenarios, why shouldn't the average investor. Being hamstrung by the notion that an asset allocation is for life, doesn't seem like a sound idea to me.

https://am.jpmorgan.com/us/en/asset-management/adv/insights/portfolio-insights/asset-class-views/asset-allocation/

https://www.lseg.com/content/dam/ftse-russell/en_us/documents/market-insights/asset-allocation/asset-allocation-insights-march-2025.pdf

https://professionals.fidelity.co.uk/page/global-asset-allocation-insights

https://www.blackrock.com/us/financial-professionals/insights/investment-directions-spring-2025

https://www.brownadvisory.com/us/insights/2025-asset-allocation-perspectives-outlook

chiang_mai

There's an interesting clause in the new US tax bill that Wall Street believes will further tax US investments, "This includes raising tax rates on passive income, such as interest and dividends, earned by investors who are potentially sitting on trillions in American assets".

https://www.straitstimes.com/business/economy/obscure-tax-item-in-trumps-big-beautiful-bill-alarms-wall-street

The introduction of that type of legislation further supports investors reviewing their allocations to US assets.

Linton

chiang_mai said:

For the benefit of anyone who is interested, linked below are some of the asset allocation reports by major banks and investment houses. If you read them all and compare, you'll see some common themes, you'll also see plenty of evidence of tactical responses to developing economic and political scenarios, some of which endure for several quarters. My point in this thread is, if the majors have tactical scenarios, why shouldn't the average investor. Being hamstrung by the notion that an asset allocation is for life, doesn't seem like a sound idea to me.

https://am.jpmorgan.com/us/en/asset-management/adv/insights/portfolio-insights/asset-class-views/asset-allocation/

https://www.lseg.com/content/dam/ftse-russell/en_us/documents/market-insights/asset-allocation/asset-allocation-insights-march-2025.pdf

https://professionals.fidelity.co.uk/page/global-asset-allocation-insights

https://www.blackrock.com/us/financial-professionals/insights/investment-directions-spring-2025

https://www.brownadvisory.com/us/insights/2025-asset-allocation-perspectives-outlook

Investment houses have competed on short term gains. If one claimed that they made an average of 10% per year for the past 20 years they could be easily countered by the one who made 20% last year. League tables are usually for 1, 3, and 5 years. Look at the investment press.

The pressure to achieve short term gains one assumes  is even stronger on the individual investment managers within the financial institutions. They cannot wait for the long term if they wish to advance their careers.

Up to about 20 years ago private investing was mostly a pastime for the rich in the UK. A successful investor would be judged in the same way as a good poker player.  It is only recently that investment returns became important for most of the UK population. Their objectIves in investing are very different to those of previous generations.

if you are investing for the long term, allocations should be driven by your objectives rather than guesses as to the future short term movements of the world economy. Reducing risk by diversification is more important than spectacular gains. It minimises  the risk of being seriously hit by short term events.

Focusing on diversification does not mean keeping the same allocation for life.  The world changes over time. Opportunities for investment change.  New areas become available, others disappear.. For optimal diversification you need to make best use of all that are available. This is very different to reconsidering your allocations after each new headline.

GeoffTF

chiang_mai said:

My point in this thread is, if the majors have tactical scenarios, why shouldn't the average investor.

Why would we want to copy failures?

https://www.evidenceinvestor.com/spiva

dunstonh

chiang_mai said:

For the benefit of anyone who is interested, linked below are some of the asset allocation reports by major banks and investment houses. If you read them all and compare, you'll see some common themes, you'll also see plenty of evidence of tactical responses to developing economic and political scenarios, some of which endure for several quarters. My point in this thread is, if the majors have tactical scenarios, why shouldn't the average investor. Being hamstrung by the notion that an asset allocation is for life, doesn't seem like a sound idea to me.

https://am.jpmorgan.com/us/en/asset-management/adv/insights/portfolio-insights/asset-class-views/asset-allocation/

https://www.lseg.com/content/dam/ftse-russell/en_us/documents/market-insights/asset-allocation/asset-allocation-insights-march-2025.pdf

https://professionals.fidelity.co.uk/page/global-asset-allocation-insights

https://www.blackrock.com/us/financial-professionals/insights/investment-directions-spring-2025

https://www.brownadvisory.com/us/insights/2025-asset-allocation-perspectives-outlook

Some of those are for investors domiciled in USD.

You don't have to stick with a single asset allocation model for life.   Tilting away from market capitalisation is not uncommon and can be very successful or it could produce less.   In a cycle where US equities is best, tilting may not yield as much if you tilted away from US.    However, in a cycle when US is not the best (which as we know happens in alternating cycles) then tilting away from US would be more successful.

Tilting doesn't tend to refer to extreme changes though.  Its is as the name suggests, a tilt in the direction away or towards.