ETF At Record Highs: Wait For US Election Or Keep Investing?

Summary

In this video, the speaker discusses the recent global economic events, including interest rate cuts by the Federal Reserve and the ECB, and China's economic stimulus. They explain how these developments have affected markets, particularly stocks and Bitcoin, which have seen significant gains. The speaker also shares their ETF portfolio performance, which is up 15.5% in 2024, and emphasizes the importance of staying consistent with long-term investment strategies, despite upcoming events like the U.S. elections. The video concludes with advice on remaining cautious but committed to a global ETF investment approach.

Takeaways

• 📉 The Federal Reserve (FED) cut interest rates by 0.5%, which led to a rise in the stock market and other risk assets like Bitcoin.
• ⚠️ Financial analyst Tom Lee advises investors to be cautious before the US elections in early November, as markets could be volatile.
• 🏦 The European Central Bank (ECB) also cut the overnight deposit rate by 0.25% due to slow growth in the EU, with another cut possible this month.
• 📈 China's economic stimulus caused its stock markets to surge, with indexes like the Shanghai Composite and Hang Seng rising 18-26%.
• 🌍 The global ETF covering the FTSE All-World Index had a positive month, closing up 1.48% in September and showing a year-to-date performance of 17.33%.
• 💼 The portfolio shared by the narrator and his wife saw a 1.85% increase over the last 30 days and is up 15.5% year-to-date in 2024.
• 📊 The narrator’s investment in ETFs, especially in the Invesco FTSE All-World (FOYLD) ETF, has performed well, increasing by 3.3% recently.
• 🇺🇸 Historically, US stock markets tend to perform well after interest rate cuts, with an average 9% gain in the 12 months following a cut when the S&P 500 is near its all-time high.
• 🔗 Emerging markets, including China, have outperformed developed markets in 2024, benefiting investors holding global or emerging market ETFs.
• 💰 The narrator and his wife plan to stick to their strategy of investing in global ETFs and allocating 10% to Bitcoin as a high-risk speculative investment.

Q & A

What triggered the recent rally in the stock market and other risk assets like Bitcoin?

The rally was triggered by the Federal Reserve's decision to cut interest rates by 0.5%, the first rate cut in over 4.5 years, along with China's significant economic stimulus and the European Central Bank (ECB) cutting its overnight deposit rate by 0.25%.

How has the FTSE All-World Index performed over the past month?

The FTSE All-World Index started the month roughly, dropping by as much as 3.8%, but managed to finish September with a gain of 1.48%, bringing its year-to-date performance to an impressive 17.33%.

What is the current performance of the ETF portfolio the speaker shares with his wife?

Their ETF portfolio is up 1.85% (€6,800) over the last 30 days and 15.5% (€50,700) since the start of 2024. The Invesco ETF shares, which they began buying in July, are also up 3.3% after a few rough months.

What is Tom Lee’s view on the market leading up to the U.S. elections?

Tom Lee, a well-known financial analyst, urges investors to be cautious before the U.S. elections on November 5th. While the easing cycle started by the FED is expected to be positive in the medium term, the short-term market movement could be volatile, with a potential post-election rally regardless of the outcome.

How have Chinese stocks performed recently, and what impact has this had on emerging markets?

Chinese stocks experienced a massive rally, with the Shanghai Composite and Hang Seng indexes increasing by 18-26% in a short period. This has positively impacted emerging markets, which have been outperforming developed markets so far in 2024, potentially continuing to do so for the near future.

What is the speaker's investment strategy regarding ETFs?

The speaker and his wife invest in a single ETF, the Invesco FTSE All-World, on a monthly basis through automated recurring investments. They cover both developed and emerging markets and plan to stick to this strategy despite the U.S. elections or market volatility.

What has been the overall return on the speaker's ETF investments since 2017?

Since they started buying ETFs in 2017, their portfolio has seen a total return of $16,400, with an average annual return of 11.25%.

How is the speaker’s speculative investment in Bitcoin performing?

The speaker’s Bitcoin allocation had a strong month, finishing up by 7.8%. Year-to-date, Bitcoin has returned 49.7% in 2024. Based on historical performance, October and November are usually strong months for Bitcoin, and the speaker has high expectations for the upcoming months.

How does the ECB's recent interest rate cut affect the speaker’s investments?

The ECB recently cut the short-term deposit rate to 3.5%. Despite this reduction, the speaker earned €95 in interest on cash reserves in September, thanks to the 1:1 rate pass-through from their broker. However, there are expectations of another rate cut due to slow growth in the EU.

What percentage of the speaker's investments is allocated to high-risk assets like Bitcoin, and how does this fit into their strategy?

The speaker allocates around 10% of their portfolio to Bitcoin as a high-risk, speculative asset. Despite Bitcoin's volatility, this strategy has worked well for them since 2017. They plan to continue this approach alongside their more conservative ETF investments.