Financial Advice and The Grand Old Duke of York

Updated: Sep 1


OPPORTUNITY KNOCKS?


“It has never paid to bet against America” is the view of Warren Buffet. We attach four diagrams to help explain why the timing is actually good for betting on America. By America we take what Buffet meant- the US stock market, and more specifically the S&P 500 index, the key barometer of confidence in corporate America. Thankfully, corporate America and the likes of Buffet’s opinion do not directly connect to political America. Our focus today is on the inevitability of the recovery of the former (US markets) whilst remaining confused on the latter (the politics). All summed up in our lead Diagram1- The Grand Old Duke of York who we are positioning at the bottom of the hill and turning upwards………..


WHY AMERICA?- Diagram 2- REVERSION TO MEAN.


Our Diagram 2 shows the history of US stock markets over the period 1870 to 2021. What this shows is that- whilst the market regularly gets greedy and regularly gets fearful, it has ultimately always “reverted to mean” and inflated back upwards. Great Depression was followed by recovery; WW2 followed by recovery; COVID followed by recovery.

The good news about our recommendation is that- whilst we half expect recession and half expect sometime at the bottom of the Dukes Hill…. We remain expectant that recession is a normal part of an economic cycle and therefore betting ON America now is looking like solid advice (but note our advice on how below).

WHY NOW?- Diagram 3- NEAR THE BOTTOM OF THE HILL?

In Diagram 3 “Near the bottom of the hill” we have pieced together two Diagrams from our June Newsletter. One reflects the rising bull market for the decade run up to the end of 2021, and then the fall of H1 of 2022. If Diagram 2 is about 150 years of upward inflationary performance, Diagram 3 is a focus on the more narrow “in-a-lifetime” period.

Whilst the Grand Old Duke can plod on for 150 years, our client base will be more focussed on the next couple of economic cycles (one hill at a time)- and our stress for today is: look at where The Grand Old Duke is currently roaming.

HOW TO BENEFIT- Diagram 4- Expect volatility buy in tranches (cost-price averaging).

Whilst this article is bullish about the medium term prospects of the S&P 500 , we accept that the shorter term has less certainty. In fact, a certainty of volatility. Which is why we bring out Diagram 4 – and the explanation of dollar-cost-averaging…. regular purchases into the market.

If you wish to find out what vehicles are available (Investors Trust are even offering a regular savings guarantee of capital for example)- please let me know and lets debate the above - Give me a call !

 

For more details, or to contact Rob

please call : +971 50 685 7090

robert.palmer@mondialdubai.com

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