Booster Client Update - Share Markets are at record levels, shouldn’t I sell?
Share Markets are at record levels, shouldn’t I sell?
The first seven months of 2017 have seen global markets continue to go up at a surprisingly consistent rate. However, most investors, particularly those in growth or high growth investments, will be aware that equity markets rarely experience such blissful performance without some form of volatility. This has led many commentators to opine that markets are at record levels and therefore they are primed for a significant sell off. While in growing markets, corrections happen from time to time, they are healthy part of market cycles, and history suggests that record highs are not as uncommon as many investors think.
The below chart counts every trading day since the 1950’s for the S&P 500 index, which is over 15,000 trading days, measuring its distance from the latest market peak. What the chart shows is that over 40% of the time markets are within 5% of the market peak; as markets rise over time, on average more than one in twenty days is a new record high!
While this year so far has had a higher percentage of record highs (over 20% of days have been a record), the market is moving strongly higher on global economic growth and expanding corporate earnings. In this type of economic and market environment, record highs are a confirmation of the underlying fundamental drivers of the market. This positive setting for markets will end at some point, and global markets will in time experience another recession however the downturn won’t be driven by record highs. So, should you sell because markets are at record highs? For a long-term investor, probably not.
Summary of Key Portfolio Changes
Global Direct Shares
- During August we added oilfield services leader Schlumberger, offset by the removal of National Oilwell Varco (NOV). Schlumberger have the number one market share across most of the company’s product lines, and earnings that are more than four times of NOV. While NOV has close to a monopoly position in its offshore rig business, Schlumberger can claim a top three market position in 20 out of 32 oilfield service sub-markets.
- National Oilwell Varco’s focus on offshore oil will remain a significant part of the global production base, however it now faces more competition than in the past, as the source of incremental oil supply, and hence demand for oil rigs, is unlikely to grow at the same rate it has historically. This mean that overall Schlumberger carries much less risk than NOV, and has a much more diversified exposure to the different segments and regions, within a low and stable oil price environment.
- We also added payments behemoth Visa to the portfolio, offset by the removal of American Express, which had outperformed the wider market by over 20% over the past year. Visa is the dominant player in the global electronic payments market, with about a 60% market share. The tailwinds for the payment providers are huge with global payments market growing from $16 to $40 trillion since 2000 and non-cash share growing from 32% to 64% of total payments. While a lot of noise has been made of payment substitutes, Paypal as the leading potential disruptor has taken 15 years to capture $250b in value, which is only 20-30% of the online payments space (1% of the total); while Visa is still number one in this segment with over $600b in online payments.
Do You Have a Toxic Relationship with the Phrase “Treat Yourself”?
The phrase “treat yourself” has become a modern mantra. It’s a great way to celebrate a milestone, reward a job well done, or break free from your everyday routine. However, when it comes to our bank accounts, treating yourself can sometimes cause more harm than good.
One small indulgence leads to another, and before you know it, the lines between self-care and overspending blur. You might walk away from the register with a bag in hand but a sinking feeling in your stomach. Sound familiar?
Scroogenomics at Christmas: Finding Joy Beyond ‘The Extravagance’
Gazing through the dimly lit windows of his modest office, Ebenezer Scrooge pondered the modern-day Christmas, “Ah, Christmas – each December, a tide of frivolity sweeps the world, with consumers collectively parting with an estimated $1 trillion globally on holiday spending.”
Reflecting on this, the Scroogenomist wonders, “What if Christmas were not marked by gaudy extravagance, but by acts of kindness? A season where gifts are not measured by their price tags, but by the care and thoughtfulness behind them. A handmade scarf, a heartfelt letter, or simply the gift of time – all these carry more value than gold. How uplifting it would be if people prioritized what truly matters: love, compassion, and the joy of giving.”