Hello, let me introduce myself, I’m David Rackham a Financial Adviser with Temple Wealth Management, and I want to take a look back at what has happened over the past month you will see we have had an eventful summer.
No, not the Euros. Or the Olympics. Or Wimbledon. Nor do we mean the political shenanigans – in the US, France, and of course, the UK.
For once, in the normally dead days of summer, we’re talking about the financial markets. There’s a reason why clichés exist; they might be corny or tacky… but there’s usually a dollop of truth in them.
August brought a couple of old favourites out again, highlighted below.
Early into August, stock markets crashed. It wasn’t pretty: the VIX index – a measure of volatility in the S&P 500 – spiked to levels only last surpassed by the levels during Covid-19.
Anxiety ran high. It’s impossible to pinpoint what specifically triggered the crash, or the quantities each of the ingredients that made for this secret recipe contributed to it. Stocks take the stairs up and the lift down. But some educated guesses suggest a mix-and-match of events: slightly weaker-than-expected US job growth and a rise in unemployment (many believe this was the trigger); in Japan, the central bank’s decision to raise the interest rates didn’t land well with those borrowing at low interest rates to invest in higher-yielding assets elsewhere (the so-called yen carry trade).
In isolation, none of these events were so dramatic. In fact, even combined, there is hardly a strong, compelling reason to believe the stock market could crash on the back of slightly weaker-than-expected data. But once that lift starts moving, you can be in the basement in no time.
…of course, things turned around so quickly that investors looking to buy when there’s blood in the streets didn’t even get the chance to. A week after the fall, the streets were spotless, and things were back to normal!
Towards the later part of August, eyes turned to Nvidia as it prepared to disclose its earnings. Goldman Sachs has described the chipmaker as the most important stock on the planet. But when Nvidia disclosed its financial results, it turned out that good news can also be bad news. The results themselves were unbelievably good. 122% year-on-year sales growth; $30 billion dollars in sales in just the second quarter! Boom! Nvidia’s shares drop more than 8% on announcement. Why? The results weren’t good enough. Expectations were unrealistic. For a world fixated on AI, spectacular growth has become ordinary. Putting an unreasonable amount of hope into one stock can only be risky.
Of course, at least individual stock pickers (whether seasoned professionals or Reddit-led amateurs) have made a decision to buy into Nvidia’s hype (or not).
The big problem is for passive investors. With a market cap of more than $3tr, Nvidia has a weight in the S&P 500 index of more than 6%. They’ve no control over whether they own Nvidia or not – perhaps they don’t even know! Concentration in one stock is hardly ever a good thing. And Nvidia might be an important stock, but there are many others worth looking at. Remember: it’s not a stock market, it’s a market of stocks. You don’t have to buy all of them, and certainly not at the same size as everyone else!
You have heard this all before and when it comes down to it if you want to make money over time and tax efficiently, one of the oldest concepts in investing prevails: not putting all your eggs in one basket. Blending stocks with lower risk bonds worked. Spreading risks around the world worked. Avoiding extreme concentration in any one industry worked. Diversification worked.
At Temple Wealth Management investing your wealth whether it is in pensions or ISA’s or looking at managing too much wealth we specialise in taking the time with individuals to balance your investment to your individual risk, and could even mean investing a very small part into Nvidea’s, along with more settled investment options to make your money grow over time and in a less stressful way. Interested in safer ways to invest your capital, large of small then why not ask to meet up with Temple Wealth Management set up a plan designed for you to give you a longer-term peace of mind.
My thanks to 7IM for providing some of the key information shared here.
Temple are here to help you understand how political developments might impact your mortgage options and to find the best deals tailored to your needs. You can contact one of our independent advisers for personalised advice and support in making confident, informed decisions by using our Facebook or Contact Us pages, or speaking to a colleague in our office on 01329 282882.
Please note: The content of this blog is for your general information purposes only and does not constitute as investment advice.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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