What’s Spooking Your Portfolio This Halloween?

What’s Spooking Your Portfolio This Halloween?
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  • Inflation is rising
  • Central Bank policy is uncertain
  • Valuations are toppy across the Pond

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Q3 2021 hedge fund letters, conferences and more

“All Hallows Eve is approaching and for investors there are a few spectres in the gloom. Markets are digesting the tricks and treats of Rishi Sunak’s Budget yesterday, but while there was good news for pubs, petrol prices and pension savers, the Resolution Foundation has calculated that the Chancellor’s measures will leave the average household £3,000 worse off.

The Man Behind TCI: One Of The World’s Top-Performing Hedge Funds

TCI David Marcus Investment ResearchThe Children's Investment Fund Management LLP is a London-based hedge fund firm better known by its acronym TCI. Founded by Sir Chris Hohn in 2003, the fund has a global mandate and supports the Children's Investment Fund Foundation (CIFF). Q3 2021 hedge fund letters, conferences and more The CIFF was established in 2002 by Hohn Read More

So, As Well As Potentially Having Less Money To Save Into Your ISA Or SIPP, What Other Ghouls Should Investors Be Wary Of This Halloween?

Inflation for one. Here in the UK we’re running at 50% above target, but it is not just a domestic issue. Brazil has just hiked interest rates in a bid to tackle double-digit inflation, and over in New Zealand the market is forecasting five to six rate rises over the next couple of years to counter the impact of inflation. In China, the Producer Price Index hit 10.7% this month, the highest on record.

In the UK, there is less clarity on how the Bank of England intends to proceed. While the Governor Andrew Bailey is signalling to markets that a rate rise is imminent, the voting record of the Monetary Policy Committee is less decided – only two of the nine members voted to raise rates in the last meeting. Markets hate uncertainty, so this lack of alignment is not good news for volatility in the short term.

What Can Investors Do To Counter Inflation?

First recognise that overhauling your portfolio on every policy hint or rumour is only guaranteed to deliver losses. Instead, focus on your long-term goals, and be valuation aware. Globally, there are parts of the market which are looking expensive – the US, tech stocks, growth-style investments have all had a great run, and it may be time to trim those gains and look to invest in undervalued assets instead, particularly those that can pay as sustainable dividend. Even if you are not looking for income, the power of compound interest will help you weather higher inflation, and reinvesting dividends through market volatility helps smooth your total return.”

Article by Emma Wall, Head of Investment Analysis and Research at Hargreaves Lansdown

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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