Financial Times contributor John Authers wrote his last “The Long View” article on the weekend after 12 years in harness at the pink paper.

We at MitonOptimal have long, excuse the pun, been readers of his articles as sensible and pragmatic journalism on investment philosophy, long term asset allocation and trying to make sense of this funny world we live in on a shorter term tactical basis. He isn’t going far though, only to Bloomberg apparently, so never fear!

In his last Long View column he espoused the theory “Put money away, let compound interest work its wonders, and the chances are you will be fine”. He recounted a story of his winning £500 pounds in 1992 and investing it in unit trusts to prove his point.

Please read his article online but his conclusion is that he got his asset allocation wrong: he invested exclusively in UK home equities, whereas those in US and particularly big technology stocks have significantly outperformed during this period.

Diversify, minimise fees, think about asset allocation, don’t trade too much or chase performance and remember, if you are patient, the long run is your friend, were his concluding remarks.

One of the key decisions facing equity investors in 2018 has continued to be whether to allocate to the US or the rest of the world? At the time of writing the MSCI World ex USA is down 3.8% year to date, MSCI North America is up 8.7% and MSCI Emerging Markets down 9.7% (all in USD terms), which is massive divergence on a nine month view. The MSCI World is still up year to date, but down off the highs.

Below is some research produced by Nedbank looking at narrow market breadth. The number of global stocks in the MSCI World Index that are now outperforming the index is at a record low and the proportion of countries’ markets outperforming the MSCI All Countries World Index (ACWI) is also at historically low levels.

 

 

The big question here is have we seen the falling market due this falling %, i.e. Emerging Markets are under big pressure and down nearly 10% YTD (and much more from their peak), or are we about to see the US market follow suit? Month-on-month mean reversion is not an exact science, nor can be relied upon with any degree of certainty. Moreover, with real return expectations falling for most asset classes, The Short View is also important.

We will continue to follow John Authers at Bloomberg news to see how the next 12 years unfold.

Download: Weekly Comment – Scott Campbell, 101018

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