The S&P was down another 2% yesterday, Free sharing link to the FT article is here
The price we pay for investing in global passive equity funds, as most of us in DC “pensions” do , is that we have to see our pensions devalued by the folly of Trump’s economics. I have not felt so helpless at the hapless since the short spell when Liz Truss took control of our economy and messed up the funding of our pensions while sending interest rates spiralling.
There are many who point to better funding positions for DB pensions due to “cheap” liabilities but the truth is that most DB pensioners were not protected from inflation and DC savers are now discovering they have no protection as their pension values are slashed.
We need to start thinking, as Nest is, of investing for the long term in assets that pay steady income and are not simply valued by jazzy techonomics.
We need to think of pensions as a means of getting paid and not a pool of wealth to pass on to the next generation.
I am not sure why what happens with the Nasdaq and S&P should govern my retirement. It is time that we took a long-term view on our investment strategy and articulated it to those whose pensions our schemes are looking after.
S&P over past 6 months.
There has to be good sense in our pension investment and I hope that what comes out of the current pension investment review (led by a good HMT person) will ensure that we are not exposed to the volatility not just of US stock markets but to plays on exchange rates.
Our pensions can do more than they are currently doing, We must thinking of pensions as personal and think of them – for the most part – as collective when funded, collective when not.
The country should be behind our pensions as part of our country’s capacity to act independently of others. Right now we appear to be in the hands of Donald Trump and that doesn’t do.
Trump is not showing a softer side at all.
I don’t know why passive equity investment default funds and investment consultants track worldwide weighted indices. Such indices are inevitably heavily weighted on markets that have the highest price earnings ratios increasing their vulnerability to changes in market sentiment which in turn amplifies volatility.
I suspect some of the recent pressures on the S&P and Nasdaq arise from global weighted funds redirecting their investments (albeit at the margin) towards UK and European investments, amplifying the volatility.
In my personal SIPP I hold funds which track geographic and industry specific indices and monitor against pre-determined target weightings (for example 25% tracking UK equities), so that my monthly new contributions are invested in the most underweight market. This stops me investing at tops of markets and although I may lose out in the short term against global performance, I gain a more stable long term return (7.5% p.a. achieved over 20+ years after all costs). This is not rocket science and also works if I was decumulating rather than accumulating! Post Trump my most over-weight sector has switched from US equities to European equities – but not to the extent that I am currently investing in the US.
Henry Could we get Andrew Smithers back to PLayPen?
Last time I was persuaded to dump the UK eqity market and went into Portuguese real estate and I am very happy to have improved the portfolio by over 50%. I am now taking profits and assemblig cash to return to markets when they correct further.
https://smithers.co.uk/wp-content/uploads/2025/01/SharePrices-World-Economics-%E2%80%A2-Vol.-25-%E2%80%A2-No.-4-%E2%80%A2-October%E2%80%93December-2024.pdf
More than five years from commencing payout? Trump will be gone in January 2029 – and given his tariff strategy/process to date, the tariffs could be gone by then, or even within a year, or even a month, or a week, a day or hour to hour. So, buy the dip?
For those of us within five years of commencing payout:
– Long ago, we heard about “Sequence of Returns” Risk – and we have already been setting up our bucket strategy or another process to meet our cash flow needs.
– If not, looks like we might need to keep working – if only part-time, to provide income/cash in addition to Social Security. Long ago, US retirement experts suggested we would have to work one or more additional years, if only due to changes in life expectancy – where each year might improve our chances at retirement “success” (maintaining your pre-retirement standard of living) 10%. See: https://crr.bc.edu/desperate-to-retire-dont/
Just as important, tariffs don’t crap on all equity investments equally. For US firms that produce and sell within the states, or source materials/resources domestically and produce domestically, those equity values may improve in situations where tariffs are effectively deployed – so, once the organizations that benefit from tariffs gain a competitive advantage, those might be the equity securities to sell to meet any need for cash.