Peter Brown spoke at Smart Money Live and he covered a number of key questions which investors will need to consider when formulating their investment plan for 2021/2. He will be covering these points and much more on creating a stock portfolio in his Stock Investing course beginning on Thursday 6th of May. (More info here.)
The impact of Brexit
Peter argued that in some case Brexit offers investing opportunities. He believes that there is value in some UK firms and investment trusts which have taken an unfair hit to their valuation based on Brexit but still remain solid and in some cases undervalued businesses. However not all British companies are necessarily offering value and one has to be selective in identifying these value investing opportunities.
The world is poised to recover from a serious blow to economic activity.
The big question is how strong will that recovery be, will it lead to inflation and will it lead to a rise in interest rates, which would be damaging to stock markets.
Is the stock market overvalued?
Some commentators and investors argue that there are a number of alarm bells surrounding current valuations. such as the S&P 500's Shiller P/E ratio, price-to-sales ratio and price to book ratios all looking worryingly high.
Should you therefore be looking at value investing opportunities? If you don't overpay in the first place, you are a lot less likely to lose money. Where are these value opportunities? Peter will discuss what industries, commodities and geographic mixes are currently looking attractive on his course.
What is your pension and investment mix?
For example does your portfolio contain bonds? They used to be known as safe havens that offered a risk-free return. Now with so many of them actually delivering negative yields, they represent return free risk. Sure, you’ll get (most of) your money back, but the risk is a severe loss of purchasing power over any decent length of time.
'They are a safe place to hide sometimes when you need to weather a deflationary type storm, but that’s all.'
Is now the time to review your investment mix and rebalance?
Are we likely to see huge price inflation? There has been a lot of discourse on it. From the financial times citing 'US firms sound inflation alarm' to Bloomberg citing “The 10-year U.S. Treasury yields are at a post-shutdown high of 1.63%. …These levels remain historically low, and …actual measures of consumer prices are still unremarkable, and well below 2%. But the shift in market psychology has been very swift, with the prospect of a return to secular inflation discussed seemingly everywhere. Why?”
While in Ireland Inflation is “not a pressing concern” according to the ESRI professor Kieran McQuinn. He believes “Because of the nature of the shutdown and the restrictions; because there’s been a huge fall-off in demand… that has led to disinflation in many items in the traditional basket of goods and services. So, by definition, when consumption rebounds, these items will experience a pickup in prices, there’s no doubt about that.
But overall, I don’t think inflation is going to be a major issue. Of course, when you are pumping huge amounts of money into the economy as the government is, you always have to have a certain concern about inflation, there’s no doubt about that, but it’s a second-order problem at the present time.” Peter will discuss this further in his course.
Peter will be addressing the points covered in the article and those below in his stock market investing course which starts on Thursday 6th of May.
Basic investing principles and making an investment plan
What is screening technology and how do you use it?
Tools and forms of analysis such as Piotroski F-Score
His 10 key pointers for stock investing
Shorting the market
Tax efficiency checklist.
Pitfalls to avoid