World Indices Roundup 2020

[Mod note:split off from 2019 thread]

Happy New Year to all on the forum!

Appreciate everyone’s comments throughout 2019.

Obviously this hasn’t quite panned out as expected - not even nearly so. Any thoughts for what lies ahead in 2020?

Onwards and upwards?

 

Hasn't turned out well for those without 2020 vision, or by trying to drive by looking out the rear view window. Opportunity will be there for the taking for those with visual acuity in 2020. Maybe time to switch focus to income producing shares with low bank interest rates set to continue for some time and a search for yield. Continue to cease opportunity and not cower in the bomb shelter, so the first cabs of the rank for me are MYS and SSM.

 

Are you an optometrist by any chance?

 

It only ever works 2 ways excessive optimism means sometimes you are overpaying ,and excessive pessimism means you talk yourself into selling at the wrong time and making the right decision for the wrong reasons...

Looking at the Dow--Jones index as it's still enjoying the normal run up the stairs 2-4 year roll as it's done over the past 75 years and easy money is everywhere even if it's just the simple don't worry about the price only the profits that come back as dividends if you stand back and look at 2019..

 

I think this might have been posted previously - but a good reminder/review.

Should You Invest Or Wait When The Stock Market Is At An All-Time-High? - Engaging Data

"The key takeaway is that in the past several generations of investing, the market has done well and most of the time, the market is within 5% of its ATH. If you waited for a large dip to invest, you could be waiting for a long time and you would have missed out on a large amount of the gains."

 

I thought i'll re-post this snippet from the recent Cuffelinks newsletter. Who knew?

 

Saw that also. Some choose VAE (Asia) over VGE (Emerging Markets) to avoid countries like Russia. But it goes to show that one never really knows what market will outperform at any given point in time. So perhaps own the lot regardless of one’s view?

@The Falcon are you still taking the position of not having a view in regard to indexing and hence favouring EM over Asia?

 

You piqued my interest, so I peeked at the vanguard website. There's not as much difference between VAE and VGE as you might first think.

Both have China, India, Taiwan (representing ~60%), Thailand, Malaysia, Indonesia, Philippines (representing 10%) - in very similar allocations.

The primary differences are:
VAE - Korea (13.5%), Hong Kong (11.2%), Singapore (4.0%)
VGE - Brazil (8.2%), South Africa (5.3%), Russia (4.2%), Mexico (2.8%) and a long tail.

Ohh, and Greece is in VGE 0.4%.

 

A good read and reminder that no one knows.

Forecasting Follies 2020

 

World Indices Roundup 2020

It doesn't bother me if I'm always right.

And you?

 

In my simpleton view, it's always time to focus on income producing shares

 

Yes mate. VGE. I have size and value tilts though don’t have any view on which markets are long term mispriced which you’d have if taking a regional tilt.

 

Heretic.

 

Hey @The Falcon , from memory you were not keen on factor investing previously as they probably aren't worth the cost/fees/hassle. Curious to what made you change your mind? Is it because DFA funds are lower cost with higher factor loading compared to the more commonly accessible ETF's?

 

Thanks mate. I thought that would be the case. Although I’ve chosen not to invest in this area of the market at this stage of our life as retirees if I was going to I’m also of the view that one might as well own the lot being VGE. As per the Cufflink article who would have though:

 

Can you clarify how you're investing in these factors? I think QVE was your choice for value?

I'm also indifferent to regional tilt, but happy to take on more risk through small caps and value. But it's a tricky area for us Australians... not many good, cheap ETFs that focus on factors here.

 

That’s right. I’ve used DFA unlisted funds which I am comfortable with for survivability as well as meaningful factor exposure. As I now work with
an advisor I have access to these funds whereas I wasn’t happy with ETF offerings.

 

Hi mate, good question. I guess a lot of it came back to looking through the lense of my own issues around managing the portfolio with a fixed SAA and not wanting to tweak / fiddle, as well as survivability of ETF offerings and cost - The better products being DFA (in my view) inaccessible to DIYers. It can be hard to rationalise two opposing ideas (cap weight vs factor) and I knew I’d struggle unless that was outsourced. So where we are at ; agreed SAA and products with advisor they then manage the portfolios (3) cash inputs, rebalance, admin, reporting. In my case it’s been worthwhile so far.

 

Interesting little piece of analysis on current stock market highs.

Is This As Good As It Gets For the Stock Market? - The Irrelevant Investor

And then the conclusion....

"What I am absolutely am saying is that if you’re saving investing for retirement, you shouldn’t be making changes to a portfolio that you don’t plan to use for another few decades based on feelings.

Spend more time on making sure your personal finances are in order and less time worrying about what the market will do next week."

 

I agree with most of the above. It's impossible to time the market consistently. If you have time on your side, far away from retirement, then it's best to just stay invested. Staying out of the market means you're removing the very small chance of a 40+% drop but in the mean time you're giving away 8-10% growth year on year until that drop comes. If that drop comes after 5 years, you're still better off. If it comes earlier, you have plenty of time to recover. Having said that, it's just common sense to adjust your weightings of asset classes, and even within asset classes, based on the bigger picture.

If you are close to retirement then capital protection should be priority. Do you really need the 10% growth while risking a 40% drop at the mature end of the economic cycle when you don't have the years left to recover?

We are somewhere towards the tail end of the economic cycle, at least in the US which is still the market leader. Yes the US is becoming less of an influence as China and emerging markets are increasing influence rapidly, but even so it is the US that still sets the tone for global outlook. So when we look at the US, its economy is on the mature end of the cycle but that doesn't mean a recession is just around the corner. It could be this year or could be 5 years from now. But if you're at or near retirement and vast majority of your funds are in equities, then I'd be changing my weighting.

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/05/12/umemp rate.jpg

US unemployment rates are at historical lows, while US household debt is around all time highs around just before pre-GFC levels. Infographic: U.S. Household Debt Climbs to $13.95 Trillion Worryingly, a decent portion of this are car loans and student loans. Student loans aren't liquidatable, while a car is a terrible 'asset' for liquidation.

Similarly, delinquency rates are close to historical lows.

Unless there have been some magnificent structural changes that are magically going to create more jobs, then it's pretty obvious that the downside is greater than the upside. When things are very, very good relative to history, then the chances of it reverting to its mean become increasingly likely versus it continuing to be good forever.