December 10, 2024
3
 minute read

Investment Committee Meeting notes - 09 December 2024

Written by
Jeremy Askew
Published on
December 10, 2024

The TCFP investment committee met on 9 December to discuss the current economic, political and investment environment.

As a result, a small change will be made to the TCFP Model Portfolio. Here are brief notes of our discussion:

Politics

Since the ICM last met we have had the UK budget, Trump was re-elected and France descended into chaos.

In the UK and US there is now more certainty than there was before, something stock markets prize more than anything else.

However, the UK budget has likely created headwinds for the UK economy, whereas Trump’s win has likely created tailwinds.

On both counts big, expensive, debt laden Government is going nowhere soon. There seems no appetite anywhere (other than Argentina) to address this.

France, with Germany coming up quickly on the rails, is plunging deeper into the mire. They do not have a budget, can not elect a new parliament until June next year and Macron will not resign.

Their current budget deficit is 6%, the EU rules allow 3%. We expect the old budget to be rolled over, which fixes nothing.

Germany’s situation is different, they have great financials, but coalition partners are reluctant to increase government spending to help Germany out of its slump. There is a huge economic adjustment happening in Germany where industrial policy appears to have killed off industry – they now import cars from China….

Talking of which, the China Taiwan situation seems calm for now. And we expect fairly quick peace deals in Ukraine and the Middle East once Trump has his feet under the table.

Interest Rates & Inflation & GDP

Interest rates will continue to tick down in the US, UK and EU.

Inflation is under control, although not at ideal levels, and the focus is more on lower rates supporting employment.

We can expect robust total GDP growth in the US next year, not so much in the UK and less in the EU.

However, the better measure – GDP per capita – we expect to be strong in the US and poor, if not negative in the UK and EU.

Getting GDP per head up is the battle the UK government faces, we are not yet aware of a policy that will aid that.


Market Outlook

Things have been great in 2024, although the volatility has been upwards.

The FTSE100 is up 8%, the S&P 27% and the NASDAQ nearly 30% (France is down nearly 1%).

The US market is the engine room of global stock markets and, therefore, the TCFP portfolio. Investment returns in 2024 for TCFP clients have been good.

This cannot continue forever; we are well overdue a 15-20% plunge and believe there is a better than 50:50 chance it happens before July next year.

TCFP Model Portfolios

However, we will not act on what we expect. We will act if it happens by selling bonds and cash and buying temporarily cheaper equities. This approach has served us very well in the past.

For now, we stick with the 80:20 equity:bond mix.

We will change the make up of the 80% in equities by halving emerging markets and adding that to the large companies holding.

Brazil, India and China dominate emerging markets investments. Brazil and China are likely facing headwinds going forward compared to the US. Therefore, more in large companies should improve the portfolio, even in the face of the expected market volatility.

We sell half your emerging markets on most accounts over the coming week or so. We will not alter investment accounts (as opposed to ISAs and pension accounts) to avoid creating a capital gains tax charge. We will not make this change where the value of the change is less than £500.

We continue to rebalance your portfolios in our regular forward planning meetings with you. This ensures you have the bonds and cash you need to cover at least the next 1-3 years of spending needs and can ride out any stock market slumps.

And that concluded December’s meeting. The next ICM will be in March, or sooner if needs be.