I have lost count of the number of fund managers who have told me over the last decade they don’t pay attention to governments. In a globalised economy, political grandstanding just doesn’t matter, was their view. Well, it matters now.
Scroll through my inbox and you’ll find more emails devoted to Brexit, Trump, trade and a Corbyn government than you will on earnings forecasts. Politics has made a rather rude re-entry into the world of investing. So Brexit and Corbyn are sinking the UK stockmarket; fear of regulation is killing equities in the tech sector; and fear of tariffs ripping up supply chains is doing for everything else.
From their peak in September the FAANGs have lost $1trn of market cap. Nasty. Elsewhere the Shanghai Composite is down 30% from its peak; Italy is off 25% and the Dax has tumbled by more than 20%. Deutsche Bank says that 90% of the 70 asset classes it tracks were in the red by mid-November. The previous high? Eighty-four percent in 1920.
It’s also worth mentioning that in the UK, buy-to-let property is also on its way out. Since the stamp-duty changes and cuts to mortgage interest relief, the number of landlords is down 120,000. This makes sense: if you can’t rely on making serious capital gains any more (and you can’t), the sums just don’t add up.
You’ll be tearing your hair out by now. What can you do? In the past the correct answer (not always the one we have given) has been to buy on the dips – religiously. This year that has not been a good strategy. For it to become one again you have to believe two things.
First, that there is a global downturn on the way; second, that central banks will react to it with another burst of market-boosting stimulus (see Charles Bean’s remarks in this issue of the magazine). The former is probably a given. The latter is not: central bankers could come over all responsible and stick with their “normalisation” attempts.
The only thing equity investors can do is to look for value. After all, the price at which you buy something is the only real determinant of your long-term return from it. So look at UK equities (lots of value) and consider Latin America. Use fund managers that have some focus on value, such as Schroders, Kennox, Merian and Oldfield Partners.
Finally, if you want to talk about all this more, go to Ebay and you can bid to have lunch with me (the money raised goes to UK charity Habitat for Humanity). This year I will be joined by Claer Barrett, personal finance editor of the Financial Times. We won’t be able to bring back the great quantitative easing-driven “everything-bubble” of the last decade or roll back buy-to-let legislation for you. But we can have a stab at answering most of your questions about what will happen to your money next.