September has started in a very typical September fashion. Down! It’s traditionally the worst month of the year in terms of returns. But that’s not a bad thing… As longer-term investors – it’s great when things go on sale. That’s when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) – it’s possible you will get another chance this month. As I wrote recently – the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence…
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Thoughts on the Rest of the Year
Over the past year or so – one of the key investment themes has been “bad news is good news”. Bad news implied the Fed was more likely to cut rates. For example, after the market incorrectly assumed we would see 6 or 7 rate cuts at the start of the year – the Fed have finally come to the table. In other words, the economic risks (to growth) are sufficient enough for the Fed to act. This is important. What happens during this transition is “bad news is no longer good news”. History shows us when economic conditions worsen during an easing cycle – stocks perform poorly. Therefore, the market’s primary concern now is whether the Fed has waited too long?
Smart Money Sells Big Tech… Invests in NKE & SBUX
Something I do four times a year is pore through something known as “13Fs”. A 13F is a quarterly report that institutional investment managers with over $100 million in assets must file with the US Securities and Exchange Commission. And whilst these filings are submitted around 45 days after the quarter ends (e.g. August 15 deadline for June 30 quarter end) – they offer us insight into how the “smart money” is thinking about certain assets. Some names I follow include (not limited to) Warren Buffett, Bill Ackman, David Tepper, Howard Marks, Stan Druckenmiller and Seth Klarman. Now there was a consistent trend during Q2 – where large cap tech exposure was being reduced.