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  • Writer's pictureNoel Watson

Investing: what is working now? Summer 2024 edition

Updated: Jun 21


Introduction


I started writing a blog while working in investment banking almost twenty years ago. While the blog is no longer live, I am fortunate that I am able to visit Wayback Machine to revisit my posts from the Global Financial Crisis.


This got me thinking - what if I took a snapshot of investment trends today that I could revisit many years from now? We've seen how different investing beliefs were at the end of the 2000-2010 S&P 500 "lost decade" compared to today. How will 2024 look with the benefit of hindsight when we look back from 2034?


Some of our recent blog posts have been technically "heavy", taking significant time to write (and probably to read and absorb). This post is (hopefully) a much easier read. Below, we list what many investors currently think is hot (or not) in the investing world (using the Scoville scale and a couple of film characters to compare our selection).


It's not an entirely scientific observation based on:

  • What we see in DIY investors' portfolios.

  • What we see on investment platforms' bestselling fund lists.

  • What we read on various outlets (news, internet forums etc.)




NVidia - Pepper X


NVidia recently passed Microsoft and Apple to become the world's largest listed company.



Nvidia is so hot right now (fans of Zoolander will understand!), with investors clamouring to buy the stock. As we discovered in our analysis of efficient ways to blow up your retirement plan, some are not content with just owning the stock and are resorting to leverage in an effort to boost their returns, as seen on a recent Hargreaves Lansdown best-selling ETF list!



I remember visiting San Francisco around the turn of the century when the .com boom was in full swing and having a delivery from Webvan. Of course, home deliveries are commonplace now, but many of these pioneers, Webvan included, didn't survive.


How will NVidia fare over the next few years? Will there be a new pepper even hotter than the 2.7m Scoville Pepper X? Only time will tell.



S&P 500/U.S. tech - Carolina Reaper


The S&P 500 and/or anything tech-related are hot on the heels of Nvidia. Investors don't seem to care that the NASDAQ 100 fell over 80% from its March 2000 peak and took almost 15 years to recover.



Nor are they worried that the S&P 500 suffered a lost decade from 2000-2010.



All that seems to matter is recent (stellar) performance!



Will these sectors boom for another decade?



Fund managers with a focus on large-cap growth shares - Naga Viper pepper


As we pointed out in our analysis of star fund managers, funds with a tilt towards growth companies have generally performed well over the last decade versus their chosen benchmarks. Investors, concluding that this is down to skill, have piled in. These funds typically had a poor 2022 when their investing styles temporarily fell out of favour, meaning they can no longer compete with the fiery peppers above. Having sampled a Naga Viper, I can assure you it's hot enough!!



ESG funds - Scotch bonnet


Some believed that ESG funds had the potential to offer outperformance and invested their money into these funds. However, recent performance has been less positive, and investors, putting aside their desires to invest sustainability, have voted with their feet.



Bonds - Tabasco


Bonds typically feature in a portfolio to dampen down volatility and protect overall falls when equity markets suffer. However, bonds endured a challenging period during 2022, when inflation pressures mounted. Many took this to mean that bonds no longer did their job, seemingly ignoring the fact that equities, from a U.K. perspective, didn't really suffer during this time. In more challenging times for equities, such as the aftermath of the .com book and GFC, bonds performed well.



U.K. shares - Jalapeno


The U.K. has become a relative minnow, contributing less than 4% of global market capitalisation. Over the last two decades, the U.K. market has trailed the U.S. equivalent, returning around a third (284% vs 810%).



That said, we often see some bias towards the U.K. (more than the <4% we would expect) in portfolios.



Emerging markets - Cubanelle


We cannot say the same for emerging markets! Emerging markets had a great run from 2000 to 2010, returning almost 10% yearly when other markets, such as the U.S., struggled. As might be expected, emerging markets were the place to be at the end of this decade.


"All of the growth in the world is expected to be in emerging markets, and nobody doubts their stability anymore (warning!). So why bother with U.S. equities?"


We very rarely see emerging markets mentioned, let alone someone holding them in their portfolios.



Small-cap value shares - Bell pepper


The bell pepper registers zero on the Scoville scale! In contrast to Nvidia, small-cap value shares are sub-zero.



In contrast to the good fortune of large-cap growth managers, fund managers with a tilt toward small-cap value have suffered over the last decade.



It's fair to say that small-cap value funds don't tend to feature on best buy lists!



Conclusion


This post may be a one-off, something we produce every few years or whenever we see interesting market trends. Only time will tell.


Investing is simple, but not easy. It's very difficult to keep a focus on what has always worked and instead focus on what is working, which can often be bad for your wealth.



Want to find out more?


Please contact us if you want to build a portfolio using timeless principles that have always worked and that give you the best chance of retirement success.



About us


The team at Pyrford Financial Planning are highly qualified Independent Financial Advisers based in Weybridge, Surrey. We specialise in retirement planning and provide financial advice on pensions, investments, and inheritance tax.


Our office telephone number is 01932 645150.


Our office address is No 5, The Heights, Weybridge KT13 0NY.


Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.


Although best efforts are made to ensure all information is accurate, you should not rely on this blog for your personal situation or planning.


The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


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