28 Days Later...

Source

Emerging into the sunshine after being out of touch again for a couple of weeks, what does the financial landscape look like?

Still no sign of hordes of zombies: well, maybe a couple lurking in the depths of the DIY Income Investor portfolio but they seem to be under control for the time being.

After another trip - this time to Ireland, and again unplugged, without access to the Internet - I can assess the impact of a further couple of weeks of the portfolio on autopilot.


Fortunately - or probably more accurately, luckily - the UK and world stock markets have continued their recovery since the jitters in June. As of today (nearly the end of July), the portfolio has gained (or should I say, regained) nearly 6% in value in the month. This more than makes up the losses sustained during June. although the portfolio value stands still slightly below its all-time high, experienced at the end of May.

Like a dingy floating on the tide, the portfolio seems to have risen with the generally increased optimism of the markets.

This time, however, there are no flashing 'sell' signs - although SEGRO (a REIT) and NG (a utility company) are straining at the traces with nearly 30% price gains (equivalent to nearly 5 years current income). No, this time there seems to have been more of a consolidation and the portfolio is containing more 'gainers' than 'losers', which is nice.

However, my sense is that this feels like it might be an overall 'top' in the markets and that it could all go downhill from here. The news from Spain is grim and in Ireland (where I have just been) the national debt is around 140 billion Euros, for a population of under 5 million. It is a similar story in many countries worldwide, so a generalised slow-down - plus inflation - might be what is in store for the next few years. That means that locking into good, sustainable yields might be a good idea right now.

The portfolio is holding around 15% cash right now - an historic high. The question is: do I wait for the market to tumble or try to pick up some (possible) bargains right now? One option might be to top up on some of my income-oriented ETFs, which are currently showing some attractive yields and have the benefit of being well diversified - reducing the need to tinker. However, the unwinding of QE and its variants around the world means you should continue to be wary of government bonds, fixed-income securities and dividend-paying equities with similar characteristics, such as regulated utilities (which is why I might think about selling NG sometime soon).

The moral of this exercise in hands-off-ism, if indeed there is one, is that sometimes you need to just switch off, tune out and think. So maybe doing nothing is the way to go - for now.



I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.