InvestNow News – 10th July – Pie Funds – CIO Report: The June quarter was the best quarter in more than 20 years for the US market
Article written by Pie Funds – 6th July
The June quarter was the best quarter in more than 20 years for the US market, following a horrid March.
WELCOME MAT IS OUT FOR EQUITY SPECULATORS
The June quarter was the best quarter in more than 20 years for the US market, following a horrid March. Covid-19 has continued to spread in many parts of the world, though death rates are substantially down on peak levels. Despite this, markets have looked through the near-term disappointment to earnings, and the fact earnings per share for the S&P500 may not recover to 2019 levels until 2022. In Australia, the recovery could be more prolonged given the extent of large dilutive equity raises. Part of the willingness to do this comes from the unprecedented amount of monetary stimulus injected into the economy by central banks.
____
THIS ENVIRONMENT HAS CAUGHT THE ATTENTION OF RETAIL INVESTORS, WHOSE SAVINGS ARE NOW YIELDING VERY LITTLE. RECORD NUMBERS OF RETAIL ONLINE TRADING ACCOUNTS WERE OPENED ON MANY LOW-COST DIRECT MARKET ACCESS PLATFORMS LIKE ROBINHOOD IN US, SELFWEALTH IN AUSTRALIA AND SHARESIES IN NZ.
____
How we create value
As fund managers, we are tasked with creating value. One of the most important questions to determine how likely you are to create value is how easy is the game you are playing? In life, like investing, there are easy and hard games. New Zealand does well in rugby, which is a comparatively easy game as it is not as popular globally as football and there is less competition. We feel deservedly great when we win consecutive Rugby World Cups, however, it’s not so much we have the best athletes or some genetic disposition towards rugby. Rather, for our national sport we have picked a game which is easier because much of the rest of the world doesn’t play it and of those that do, few play it well.
Finding easy games is why we have operated traditionally in the Small Cap end of the market as there is less competition and it is easier to outperform. It’s important to differentiate between more competition and more participation. While we prefer less competition, we like more participation. So we welcome more retail investors joining the stock market with a speculation mindset, as it makes the game we play easier and allows us to create more value.
Too much optimism?
We must also be mindful of the level of exuberance in the market when a large number of new investors start showing up to play the game, as this is often a warning sign market participants may be too optimistic about share prospects.
A long-term approach
InvestNow News – 10th July – Pie Funds – CIO Report: The June quarter was the best quarter in more than 20 years for the US market
Article written by Pie Funds – 6th July
The June quarter was the best quarter in more than 20 years for the US market, following a horrid March.
WELCOME MAT IS OUT FOR EQUITY SPECULATORS
The June quarter was the best quarter in more than 20 years for the US market, following a horrid March. Covid-19 has continued to spread in many parts of the world, though death rates are substantially down on peak levels. Despite this, markets have looked through the near-term disappointment to earnings, and the fact earnings per share for the S&P500 may not recover to 2019 levels until 2022. In Australia, the recovery could be more prolonged given the extent of large dilutive equity raises. Part of the willingness to do this comes from the unprecedented amount of monetary stimulus injected into the economy by central banks.
____
THIS ENVIRONMENT HAS CAUGHT THE ATTENTION OF RETAIL INVESTORS, WHOSE SAVINGS ARE NOW YIELDING VERY LITTLE. RECORD NUMBERS OF RETAIL ONLINE TRADING ACCOUNTS WERE OPENED ON MANY LOW-COST DIRECT MARKET ACCESS PLATFORMS LIKE ROBINHOOD IN US, SELFWEALTH IN AUSTRALIA AND SHARESIES IN NZ.
____
How we create value
As fund managers, we are tasked with creating value. One of the most important questions to determine how likely you are to create value is how easy is the game you are playing? In life, like investing, there are easy and hard games. New Zealand does well in rugby, which is a comparatively easy game as it is not as popular globally as football and there is less competition. We feel deservedly great when we win consecutive Rugby World Cups, however, it’s not so much we have the best athletes or some genetic disposition towards rugby. Rather, for our national sport we have picked a game which is easier because much of the rest of the world doesn’t play it and of those that do, few play it well.
Finding easy games is why we have operated traditionally in the Small Cap end of the market as there is less competition and it is easier to outperform. It’s important to differentiate between more competition and more participation. While we prefer less competition, we like more participation. So we welcome more retail investors joining the stock market with a speculation mindset, as it makes the game we play easier and allows us to create more value.
Too much optimism?
We must also be mindful of the level of exuberance in the market when a large number of new investors start showing up to play the game, as this is often a warning sign market participants may be too optimistic about share prospects.
