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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
With my first-born baby screaming her eyeballs out, while the second licked old chewing gum on the seat, a London cabbie once turned around and told me: “Enjoy it, mate. They grow up and leave home before you know it!”
I’m embarrassed to admit that I wouldn’t have passed the “taxi test” at Duolingo. But the driver was right. My eldest is now 13 and I can’t believe where the years have gone. What’s even the point of building a sizeable pension fund if it seems like I’ll be dead soon?
This is why the past 30 days have felt so weird. That is the blackout period I have after the settlement of any trades. I’m not allowed to tell you what I’ve bought — or how much exactly — and the wait has felt unusually long. Almost as if I could have gone around the moon and back three times.
And given that the whole point of this column is transparency, it also felt wrong to blather on about UK pensions and jolly walks to the pub for the past month. Anyway, we’re finally in the clear, so here is a summary of my new portfolio.
You may remember that it moved to 100 per cent in cash last October. And that, due to Donald Trump, the opportunity cost of doing so had declined to almost zero by the end of March, at which point I was attracted to equities again.
Like most temptations in my life, I succumbed. On March 24, the buy button was pressed six times, broadly mirroring my previous investment strategy. There are significant differences, though. For starters, I now have two asset classes instead of just owning stocks — having opened up a 20 per cent position (ticker: TR34) in UK government bonds.
To be clear, I’m no believer in balanced funds again. Indeed, with four young kids, I’ll be working for decades to come, so I do not require the reduction of risk that fixed income often (but not always) provides. No, I simply made the call that gilts were oversold — and the 4.5 per cent yield was too good to pass on.
The other big change versus most of last year is an allocation to US equities again (VUAG). Ten per cent isn’t much — and below most benchmark weights. But I wanted to sleep at night if US shares went to the races again. Also, by my calculations, forward price-earnings ratios had dropped back in line with 10-year averages.
Yet those averages are still expensive, hence a dipped toe rather than a leg or shin. And at least my portfolio is now internally consistent. If the S&P 500 keeps rallying, so will the rest of my equity funds. Or they all crash together.
Meanwhile, you can see that I’m back in Japan (VJPB) and Asia (CEA1) once more. Their relative weightings, however, are reversed. In the post-Iran sell-off, earnings-based valuations dropped further in the latter than the former. So I could only bring myself to having a tenth of my portfolio in Japan, whereas I’ve gunned for twice that in Asia.
Another reason for the switcharoo is currencies. I’m less confident that the yen won’t decline than I am that the dollar may rise, if a double negative on top of forex comparisons doesn’t make your head explode. I think mine just did.
Even if I’m wrong about the greenback — and many strategists have written it off for the rest of 2026 provided that the war is closer to an end than the beginning — the sharp-eyed among you will see that I’ve slipped some Latin America (BRLA) into the mix.
These countries tend to like a weaker dollar. Ditto when US interest rates are heading south — which is usually my default position for reasons I have outlined before (demography, excess savings, AI-driven wage deflation and so on).
LatAm stocks are also some of the cheapest in the world if my back-of-a-cigar-box scribblings are correct. To be sure, I usually wouldn’t lend many management teams in that part of the world a tenner. But I might if the potential returns are high enough, which I reckon they are.
Subtract all the above from a hundred and it equals my UK equity allocation of 30 per cent (VUKG). I wrote last week about why I want lots of exposure to the FTSE 100. Add to that the compelling valuations, an index rammed with energy shares (BP just reported a doubling of profits versus last year) plus the fact that my personal liabilities are in pounds.
As you know, I’m also a sucker when everyone gives up on a country, which seems to be the consensus on “broken Britain” now. Footsie companies are global anyway, so even if the current government blows up the pound, the companies will just receive more overseas earnings.
So there you have it. Up to my noggin in equities again. And I was already bullish before the Bank of England said of shares this week: “We expect there will be an adjustment at some point.” Now I couldn’t feel more comfortable being 100 per cent invested.
Yes, there are risks galore. There always are. Risks go both ways, though. For example, Société Générale has calculated that US forecast earnings are already $600bn above where they were just four months ago. That’s the largest upward revision in history if you exclude post-recession swings.
Throw on top a possible AI boost to productivity, which I recently wrote I was hopeful about, and maybe equity markets more closely resemble 1994 than the 1999 I feared earlier. Certainly, the latest results from the massive tech companies ooze that vibe.
Over the coming weeks, I’ll do a deep dive into each of these positions. As ever, I reserve the right to change my mind. If the rally continues at this pace, I’ll soon have to.
The author is a former portfolio manager. Email: [email protected]
Source:
www.ft.com