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This is hugely important because if we're consistently losing against the benchmark frankly we should quit and just buy the benchmark. That said under performing over a year doesn't worry me, it's the three and five years that would worry me deeply.
I haven't run my numbers yet, but pretty sure I am red for the year, not sure if I am below Top40 total return (my benchmark). But I have a good run in recent years beating the benchmark thanks to a diverse portfolio and 2018 has been a tough, very tough year.
My ETF portfolio doesn't stress me, it only holds broad based ETFs (no niche or sub index ETFs) so it'll do just fine over the long-term.
I also use his year end period to do a deep review of the stocks I hold. Naturally I am keeping on eye on results and news during the year. But year end I revisit my research and reasons for buying and check they're still in force and the stocks are the quality I'd hope they'd be when I bought them. This review is not about price so much, if the stock is quality in time the price will follow.
What I also do is revisit my entry methodology for price. As I often mention the only thing we as investors really can control is the price we buy at, so we need to exercise that control. I use the 7 year average PE buying when forward PE is below. It is far from perfect but has served me well and kept me from buying over priced stocks, sometimes literally waiting for years and years before I will add a stock. Then of course sometimes it has me buying a stock that just keeps on falling (yes looking at you Woolies* and Famous Brands*). But mostly it keeps me out of over inflated stocks.
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Over the weekend it looked like we may get trade peace in our time - but the market called Trumps bluff and sold off aggressively on Tuesday evening and we followed on Wednesday.
US 10 year T-Bills, which is what I have been watching, also sold off to trade down at 2.92%. This confuses as I was watching this for the bear to start, but only at 3.5%. But it seems it couldn't wait.
The trade war with China is hurting and while Trump is saying lots, the evidence on the ground does not support his Tweets and so markets are pricing in worsening trade wars. This will hurt the two largest global economies (USA and China) and the rest of us will suffer as a result. EMs may escape the worst of it, but we're not immune.
At the end of the day I do expect some sort of trade peace. This is Trumps style, bully and berate before finally finding a deal (we saw this with NAFTA and Canada / Mexico). But it gets real messy until the final deal.
So I expect weaker US markets into the new year, and frankly I expect the major indices to hit bear turf (20% off the highs). This is not a train smash and once the bear has been tagged markets will likely rally, helped with some trade peace.
Locally we will not escape the turmoil but our market is much closer to bear turf having tagged it 24 October at 43,822 (Top40). S&P500 is bear at 2,352 (latest close 2,700) and Nasdaq 6,152 (latest close 6,795). So about another 10% down from here. FAANGs are already in bear market as I mentioned last week.
This is not the end of the world, market go up and they go down. This sell off is not driven by a financial crisis as we saw in 2008/9, it is being driven by a bullying president and US markets that have gone without a bear in almost ten years (since lows of March 2009).
JSE – The JSE is a registered trademark of the JSE Limited.
JSEDirect is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.