Image is by Francesco Ciccolella — Wave of Uncertainty

2020: Mid Year Review

Six months to forget and remember — this is an investing and economic analysis of the year so far.

I can’t believe we’re already half way through the year! What a wild ride we’re all on and I have to say; I hope you’re doing okay. The modern media machine has been relentless in bombarding us with messages of chaos and tragedy over these past six months. The limited silver linings are that finally the world is uniting and pulling together, and that there’s hope we might be seeing real change for a sustainable future and shared prosperity.

Review

At the start of the year I could never have imagined that the world would rush towards the apocalypse. However, I did warn that something was in the air, that the conditions were ripe for a big event, a crisis, or catastrophe and that people should be positioning their investments defensively.

Economics

The 20th Century was the American century. The stars and stripes guided the world out of two major wars and into the vast opportunities of a consumer driven economy. They were the leaders in thought, innovation, academia, technology, manufacturing, and had such dynamism that they were unstoppable. The people loved their freedom, their neighbours and they shared their prosperity and beliefs with the world. Unfortunately that freedom and opportunity has been progressively erroded over time. Big government, excessive regulation, monopolistic behaviour and popular politics have driven huge divisions in equality. Inequality has reached nearly every corner of modern America and it has turned opportunity into anger. The have’s versus the have not’s.

  • Job gains: will jobs return at a decent pace or will huge competition mean a big drop in wages?
  • Home values: Home prices could face steep falls as defaults rise or wages fall.
  • Politics: outrageous statements, poor handling of sensitive issues and international hot politics could create some scary moments. A huge U.S. election that could erupt in more civic chaos, trade wars and virus transmissions.
  • China: countries such as Australia continue to play hard ball with the PRC but they overestimate their own bargaining power. The reliance on Chinese consumption, tourism, students and manufacturing puts them in a difficult situation. COVID should teach everyone a lesson about the importance of domestic manufacturing but that takes decades not months to develop. *could be some opportunities in this if politicians don’t shoot us all in the foot*

Investing

The stock picks at the start of the year have proved to be resilient. I’m happy with the defensive positioning and the use of behavioural portfolio theory. The stocks selected performed well as a basket and achieved a stable -0.81% which compares to the ASX 200's -12.59%, the S&P 500's -6.64% and the Dow Jones Industrial Average’s -11.30%. Looks like we truly outperformed given the conditions.

Other Analysis

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