Page 36 - DIY Investor Magazine | Issue 41

· August 2024 36
DIY Investor Magazine
Would a Kamala Harris presidency be good for stock markets? Saltydog thinks it may well be, but there’s less certainty and that seems to have spooked markets.
The US stock markets, and the Nasdaq in particular, have significantly outperformed the UK, eurozone and other developed markets over the past 15 years.
The US economy has experienced robust growth, fuelled by innovation and a strong entrepreneurial ecosystem, especially in technology, biotechnology, and digital services. The Nasdaq is heavily weighted towards these tech companies, some of which are now the largest companies in the world. Companies such as Apple Inc, Amazon, Microsoft and Google owner, Alphabet have driven
much of its performance.
Since 2010, the FTSE 100 has gone
up by just over 50%. The FTSE 250 has done better
and is up almost 130%. The French CAC 40 has risen
by 90%, the German DAX has gained over 200%, and the Japanese Nikkei 225 is up 250%.
There are two funds that we’ve held in our demonstration portfolios for the last year that tend to rise and fall in sync with the US markets.
The UBS US Growth fund is in the North America sector and invests in US stocks with a bias towards the large technology companies. Its largest holdings are Microsoft, Amazon, Apple, NVIDIA, Meta, and Alphabet, which explains why it almost mirrors the Nasdaq.
We went into the fund last June and since then the fund has risen by 27.5%. We added to our holding last July and again in February, but then reduced ‘WE WENT INTO THE it in March. Last month,
we bought some more,
FUND LAST JUNE AND but since then it has gone
SINCE THEN THE FUND down. We are now reducing
HAS RISEN BY 27.5%’ our holding.
The other fund is in the Mixed Investment 40-85% Shares sector. This is for funds that “are required to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). The funds must have between 40% and 85% invested in company shares.”
The Liontrust Balanced fund currently has around 70% invested in shares. It has 55% invested in the US, and its largest holdings also include Microsoft, Nvidia, Meta,
and Alphabet.
We went into the fund last July, just over a year ago, and since then it has risen by 12.4%. We have added to our position a couple of times during the past year, but last ‘WOULD A KAMALA HARRIS
week took the decision to trim our holding It is PRESIDENCY BE GOOD FOR
not unusual for us to STOCK MARKETS? IT MAY
increase or decrease WELL BE, BUT THERE IS LESS
our exposure to funds CERTAINTY AND THAT
as market conditions SEEMSTO HAVE SPOOKED
THE MARKETS’
ebb and flow.
WHY WE’RE REDUCING OUR EXPOSURE TO THE US
However, over the same time period, the Dow Jones Industrial Average has risen by around 290%,
the S&P 500 has made 390%, and the Nasdaq has gone up by an impressive 665%.
Stock markets rarely ‘THE PERFORMANCE OF US
go up in a straight line MARKETS HAS A SIGNIFICANT
for long and there have INFLUENCE ON A LARGE
been some setbacks NUMBER OF FUNDS’
along the way. In 2022, the Nasdaq lost around a third
of its value.
If you look over the past 12 months, you can see that it went down between the beginning of August and the end of October last year, but since then has rallied. It briefly
fell during April, but then recovered and went on to set new all-time highs. In the past few weeks, it has had another downturn, falling by 7%.
The performance of US markets has a significant influence on a large number of funds. The funds in the North America, North American Smaller Companies, and Technology & Technology Innovation sectors are