Stocks up sun's out ????

Hi folks!

Happy Thursday in the week that saw the UK population divided into those that saw the northern lights and had the photos to prove it, and those that didn't (hello!). There's sun about and you can just about hear the hum of all those jet washers on patios and the sound of the garden furniture getting dragged out of the shed am I right? Was a wonderful Thursday evening last week in the city with a drink or two outdoors, long may it continue!

I spent the sunny Sunday slogging up and down some wonderfully picturesque but steep hills in the Henley countryside, in aid of completing two Spartan races (one for time, as I've done for the last few years and one for giggles with a team of local dads). Actually went pretty well, managed to complete my first ever "clean round" with no obstacle penalties even nailing the spear throw for the first time ever (harder than it looks!). That's my first successful spear throw in ten races. In fairness I do feel I might have succeeded sooner if attempts to install a spear throwing practice area in the garden hadn't been immediately shut down ('elf n safety gone mad eh) ... logged my highest ever day of energy burn according to apple watch and needless to say a little slow moving around at the start of the week but back up to speed now. The good news is in a couple of years I move into a new age-group where I'll be looking a lot more competitive.

Markets mumble

Stocks are up and rates are down a little. A global economy that seems still strong but cooling enough to allow rate cuts into view seems a good backdrop for stock markets to go on a march to new highs (up about 10-11% for the year), with the UK market really joining the party (orange line below) as the FTSE 100 has shot out to a series of new all-time highs faster than you can say "pass the rosé". Question is why? One answer is that it had just got extremely cheap as has been said many times, and maybe the combination of strong GDP, falling inflation and a central bank looking ready to think about cutting providing that long-awaited "catalyst" (although if tempted to hunt too much for catalysts see (1) below).

Rates are down a good 30bps since the highs of late April, still up on the year.

Rethinking US exceptionalism

We found ourselves debating US stock market exceptionalism in a recent team meeting as I'm sure many folks have in recent years and I was reminded of the below chart which I too have spent a lot of time looking at in the past (as I'm sure others have ). A new feature struck me though on this look, which runs counter to what the chart is initially trying to show (what I think it initially shows is that bull-runs of US vs international markets pretty much alternate when viewed in the long-term. Do they though). The very modest sized '04-'07 pre-GFC bull-run for non-US stocks is doing a huge amount of work there as other than that, you have to go all the way back to the 1980s for a decent run of EAFE performance vs the US (which I presume is largely Japan on that occasion). Lot of US outperformance in the right hand side of that.

Things I'm reading

1. What's the Catalyst - asks Joe Wiggins (link )

Joe unpacks that most frequently asked investing question. I find myself asking it all the time (although will do so with more caution)! Careful, as looking hard for a catalyst is a bit like making a prediction and in a very complex multi-variable situation like a country stock market the success rate of identifying catalysts is poor and all else is never equal (other than that we're all set!).

2. US Labour markets - still solid but cooling for some time says Hugh Gimber (link)

The bond markets have continued to struggle to read economic data points coming out of the US. But zooming out of the noise there's a clear trend to a cooler labour market. Maybe this was why Jerome Powell was able to downplay more hikes at the last Fed meeting.

3. Putting Resources where Stewardship Ambitions are (link )

I had been keen to see this new piece of research by PRI and Thinking Ahead Institute on stewardship, and not surprisingly they see the industry as badly under-resourced relative to the emphasis being placed upon stewardship. Realistically, this shouldn't surprise anyone who has really looked at the numbers and thought about it.

They provide what looks like a useful framework - as clearly any thoughtful approach to this has to go beyond # of headcounts, which I'll be keen to see if we can put into practice. The average level of stewardship resourcing as a percentage of total resources was 7%.

"Engagement occupies the biggest portion of the stewardship activities. However, a sizable portion of resources is allocated to ESG metrics and stewardship reporting activities combined, potentially highlighting an opportunity for greater industry efficiencies in these areas."

Related - another worthwhile read has been Tom Gosling and Harald Walkate 's series on Does Sustainable Investing Work (link ). There's a neat analogy to a 3-stage rocket in that investments would need to (1) create an effect (2) get companies or management to respond to effect and (3) impact in real economy must persist after second-round effects. This framework gets readers thinking about that all-important "theory of change" or what-is-actually-gonna-happen They come down on engagement being the most evidence-based way of achieving (1) and (2) but have doubts on efficacy, pointing toward adopting more modest goals rather than lofty ambitions that fail to get off the launch pad.

Two things I'm listening to

1. Cliff Asness was on Ted Seides (web | apple ) with the tagline that "simple investing is hard" and the usual juicy grab-bag of wisdom, insight, quotes and pet-peeves. He thinks the market has got less not more efficient. Always worth a listen
2. Meb Faber had Hendrik Bessembinder (web | apple ) exploring Bessembinder's research on wealth generation in the stock market which shows that a tiny proportion of stocks generate most of the returns and most stocks lost money. The implications for investors being diversification and being able to hold onto winners.

Grab bag

Not much for you this week other than the Aldi Whispering Angel dupe ("Atlantique") is back at just ￡7 a bottle and the top tip for your summer barbies.

I'm looking to add "The Profiteers - how business privatises profits and socialises losses" to the reading list, looks very interesting.

Life lessons - it's never actually about the Shreddies

Breakfast time brings occasional toddler-struggles in our household as I may have mentioned (to be fair he's not the only family member who's below their best pre-food ahem) - and so while that first request for "I want a weetabix as well as porridge" seems reasonable and a quick route to a peaceful morning, by the time he's sitting infront of a veritable buffet of weetabix, shreddies, pain au chocolat, toast, eggs and porridge (true story) you start to realise you aren't going to win this one and that of course ... it isn't actually about the shreddies ...

Till next time, I'll leave you with this wonderful little drone video of London