‘To many, Heathrow in August is a paradigm of Hell’ – Paul Johnson
I admit it, I am bad at taking holidays. A few quiet hours here or a sly afternoon away from the laptop there feels much more refreshing than the forced jollity of two weeks away from the office. The net impact is that I never go away on holiday in August, the month when large swathes of the commercial world of the northern hemisphere seems to be one muted heartbeat away from stopping completely.
Of course there are some practical reasons for this too. The first half of the month especially does see a rumbling on of the corporate earnings season, although judging by the concentration of results in the last couple of weeks, corporate names are becoming more and more obsessed with August as a ‘quiet time’. The second reason is that with the second or third in command manning many trading desks, lobby groups and political offices, the scope for a little bit of news to be overinterpreted is legion. And that means quite often some wild and wacky share prices. That is not bad news if you are looking to be a stockpicker rather than a pseudo index tracker.
Here’s how you typically get wild and wacky share prices. The second or third in command is either very risk-embracing or very risk-averse (broadly depending on whether their boss gives them rope to potentially hang themselves or not). So desperate to impress or scared to make a mistake at a time, any big move or big macro issue gets blown up into something more than it is. And, of course, this is dynamic not static. Imagine if you are relaxed at a 2% share price move against you in a top holding, how you will feel at a 5% move?
So all good fun to watch this and – selectively – do the opposite. I felt a little this way in the last week about Kingfisher (KGF) shares which fell back below an interesting level due to worries about the readacross from a peer’s business – which was performing pretty shabbily. Looking more dispassionately, my observation would be that the struggles of this peer had been apparent for a while and was likely to be more specific than general, so we bought a few more shares for the Global Dynamic Opportunities Fund. I expect to report back on a few more akin stories in upcoming weeks.
Of course this time around we have trade angst and related issues to deal with too. Thinner markets – and the above structural issues – can easily impact the macro variables too such as exchange rates, commodity prices and bond yields. Of particular interest this month I would say is the level of the Chinese currency and the American ten year bond yield. August also sees the regular Jackson Hole central bankers event in deepest Wyoming. Sadly – once again – my invite must have got lost in the post as the intriguing sounding 2018 Economic Symposium, “Changing Market Structure and Implications for Monetary Policy” will given a potential later August wake-up from the 23rd of the month. Just be prepared to see multiple pictures of leading global central bankers in plaid shirts as well as aggressive macroeconomic chat.
You can decide among yourselves which one is likely to be the least attractive!