ETF At Record Highs: Wait For US Election Or Keep Investing?
Summary
TLDRIn 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.
Outlines
📉 Market Reactions to Interest Rate Cuts and Global Stimulus
In recent weeks, significant financial events have occurred: the Federal Reserve cut interest rates by 0.5%, boosting stock markets and risk assets like Bitcoin. Financial analysts, including Tom Lee, warn investors to be cautious before the U.S. elections in early November. Meanwhile, the ECB cut deposit rates by 0.25%, and another cut may follow due to low growth in Europe. Additionally, China’s major stock indexes rallied 18–26% following a massive economic stimulus. This video will explore the impact on ETF investments, including a review of performance and potential strategy adjustments.
📊 ETF Portfolio Performance Amid Global Market Movements
The video shifts to reviewing the performance of a global ETF covering the FTSE All-World Index, which had a rough start in September but closed the month up 1.48%, marking a 17.33% year-to-date increase. The presenter shares personal ETF portfolio figures, revealing a 1.85% gain in the past 30 days and a 15.5% increase year-to-date, totaling $16,400 since 2017. Despite initial challenges, their newly acquired Foy Old ETF shares outperformed previous investments. The presenter credits lower fees as the reason for transitioning from Vanguard ETFs and hints at a video explaining this decision further.
📉 The Fed's Rate Cuts and Stock Market Rally Predictions
The Federal Reserve cut interest rates for the first time since March 2020, which positively influenced stock markets. Historical data shows stocks typically rise after rate cuts, with the S&P 500 averaging a 9% increase over the following year. Over a three-year span, markets have risen by 51% after rate cuts. However, Tom Lee urges caution as U.S. elections approach, predicting that wealth managers are delaying investments until after the election. While markets could fluctuate in the short term, history suggests a likely rally in November and December, regardless of the election outcome.
📈 China’s Stock Market Surge and Emerging Markets Outperforming
China’s recent economic stimulus caused its major stock indexes to surge by 18–26%, benefiting those invested in Emerging Markets ETFs. In 2024, emerging markets are outperforming developed markets, a trend that may continue. The presenter is confident in a strategy that invests in global ETFs covering both developed and emerging markets, ensuring exposure to productive companies worldwide. They advocate a long-term, diversified approach rather than focusing on specific regions. This strategy aligns with their belief that including global companies is the best way to ensure long-term portfolio growth.
🏦 ECB Rate Cuts, Interest Earnings, and Future Projections
The ECB recently lowered interest rates to 3.5%, benefiting the presenter, who earned €95 in interest on cash reserves in September. While another rate cut may come soon due to low growth in the EU and controlled inflation, the presenter is not surprised. They reflect on how few people expected rates to rise as high as 4%. Additionally, they note extra savings from using the Trade Republic card, which adds small bonuses to everyday spending, helping to optimize their family's financial situation.
💰 Bitcoin's Speculative Role in the Portfolio
The presenter addresses their small allocation to Bitcoin, which had a strong month, rising by 7.8% and reaching a year-to-date gain of 49.7%. They acknowledge Bitcoin’s volatility but maintain it as a speculative part of their portfolio, with October and November historically being strong months for the cryptocurrency. Despite criticism, they remain transparent about their Bitcoin investments and plan to continue allocating 10% of their monthly savings to it alongside ETFs. Their strategy, which began in 2017, has been successful but is not necessarily for everyone.
📅 Investment Strategy Through Elections and Market Volatility
The video concludes with the presenter reaffirming their long-term investment strategy, despite market uncertainty around the U.S. elections. They plan to continue automatic monthly investments in a global ETF, with 10% allocated to Bitcoin, and will reassess at the end of the year if necessary. The overall strategy focuses on long-term stability and consistent growth, avoiding drastic changes due to short-term events. They encourage viewers to stay the course and not let market volatility or political events derail their investment plans.
Mindmap
Keywords
💡Interest Rates
💡Federal Reserve (FED)
💡European Central Bank (ECB)
💡Stock Market
💡Global ETFs
💡Emerging Markets
💡Bitcoin
💡US Elections
💡Economic Stimulus
💡Volatility
Highlights
The Federal Reserve (FED) cut interest rates by 0.5%, boosting the stock market and other risk assets like Bitcoin.
Tom Lee, a well-known financial analyst, advises caution for investors ahead of the U.S. elections in early November.
The European Central Bank (ECB) also reduced the overnight deposit rate by 0.25%, with expectations of further cuts due to low growth in the EU.
A major economic stimulus in China caused the Shanghai Composite and Hang Seng indexes to rise between 18-26% in a short period.
The FTSE All-World Index ETF ended September in positive territory, up 1.48%, with a year-to-date return of 17.33%.
The speaker's ETF portfolio is up 1.85% (€6,800) over the last 30 days, and 15.5% (€50,700) since the start of 2024.
Investments in Foy Old ETF shares, bought in July due to lower fees compared to Vanguard, are now up 3.3% after a challenging few months.
Since 2017, their ETF investments have produced a total return of $16,400, with an average annual return of 11.25%.
Historically, U.S. stocks rise by an average of 9% in the 12 months following a rate cut when the S&P 500 is within 5% of its all-time high.
Emerging markets, particularly in China, have outperformed developed markets in 2024, benefitting ETF investors.
The ECB's recent rate cut means a short-term deposit rate of 3.5%, with the speaker earning €95 in interest on cash reserves for September.
Bitcoin saw a 7.8% rise in September and has a year-to-date return of 49.7% in 2024, with October and November historically being strong months.
The speaker and his wife are maintaining their long-term investment strategy of buying a single global ETF covering the FTSE All-World Index every month.
Their investment portfolio also includes 10% allocated to Bitcoin as a speculative, high-risk bet, which has performed well since 2017.
The couple plans to reassess their risk exposure and potentially rebalance their portfolio by the end of the year.
Transcripts
the last few weeks were very eventful
the FED finally dropped interest rates
by 0.5% pushing both the stock market as
well as other risk assets like Bitcoin
higher we do have famous Financial
analysts like Tom Lee urging investors
to be cautious before us elections in
early November though the ECB also cut
the overnight deposit rate by a further
0.25% 2 weeks ago and according to the
financial times we may in fact see
another decrease in rates as soon as the
middle of this month due to low growth
in the U not only only that a
significant economic stimulus in China
sent the country's stocks on a massive
rally last week with the two major local
indexes the Shanghai composite and the
hangang shooting up as much as 18 to 26%
within a short amount of time today
we'll discuss what all this means for us
as passive Global ETF investors how our
portfolio performed and if we're
changing our strategy in any way let's
begin by taking a look at how the stock
market performed last month looking at
the global ETF covering the footsie o
World index the startup the month was
quite rough with the footsie o dropping
as much as 3.8% at one point But
ultimately managing to finish September
in positive territory at plus 1.48%
which means its year-to-date performance
is currently sitting at an impressive
17.33% now let's see where the ETF
portfolio I share with my wife stands in
actual numbers we're currently up 1.85%
or € 6,800 over the last 30 days and
15.5% or
50,7 since the start of 2024 our invest
Foy old ETF shares which we started
buying in July instead of Vanguard due
to the lower fees are also finally up
3.3% after a couple of rough months if
you're interested in the reasons why we
started buying this one while at the
same time keeping our existing Vanguard
shares make sure you check out this
video afterwards and lastly our total
return since we started buying ETFs in
2017 now stands at plus
$16,400 with an average return of
11.25% per year since then by the way
you can find the best Locust Brokers for
ETFs in Europe linked Down Below in the
description which is a great way to
support me if you'd like to one reason
why the stock market turned around may
be due to the Federal Reserve in the US
finally cutting interest rates for the
first time in over 4 and a half years
since March 2020 with more Cuts expected
to come later this year since the last
stringent monetary policy tends to be a
positive signal for stocks at least when
nothing else is broken in the economy
the stock market has been rallying since
historically speaking stocks in the US
have been up an average of 9% in the 12
months following a rate cut when S&P 500
was within 5% of its all-time high as
was the case during the latest cut and
over a three-year period following a
First Rate cut once again with a S&P 500
within 5% of its all-time high things
are looking even better historically
with an average total return of 51%
after 3 years there are obviously no
guarantees since it's impossible to
successfully predict how the market is
going to move in the short term but as
you can see at least based on historical
data there's no reason to be worried
having said that Tom Lee a famous
financial analyst who has been right
more often than not over the past couple
of years is urging investors to be
cautious before us elections on November
5th here's what he had to say I think
the FED Unleashed uh us on an easing
cycle and that's going to be positive we
know it's actually historically positive
3 months 6 months out but what stocks
doing the next month is a bit of a coin
flip and I think that's what we're
seeing because there's some
repositioning that took place and also
we're now thinking about the 40 days
into the election so does the fact that
the election is but 40 days away sort of
ruin the perfect scenario for stocks to
get that post fed bump I I think it
delays it um just because you know in in
the conferences that I've been speaking
speaking at and seeing wealth managers
and family offices a lot don't want to
commit Capital until after election day
and it I don't think it matters who wins
it's just they want to get that event
behind them oh so you think we're going
to have sort of a dash to the finish uh
after election day is is out of the way
yeah and that's pretty typical you know
in fact uh in in election years the
November December rallies are pretty
tremendous and in fact when markets are
up more than 10% in the first half you
also get big rallies November December
sort of choppy through September so
basically whether markets move up or
down until the election is a bit of a
coin flip but if history is any
indication we're likely to see a rally
afterwards no matter which candidate
wins does this mean you should stop
investing or change your investment
strategy until November 5th of course
not it it simply means you shouldn't be
surprised to see more volatility than
usual this month speaking of markets
moving quickly a massive economic
stimulus in China send the country
stocks flying higher with its two major
indexes the Shanghai composite and the
hangsang shooting up as much as 18 to
26% within a single month if you're
investing in Emerging Markets either via
an Emerging Market ETF or via Global ETF
like the footy o as we like to then your
portfolio is also currently profiting
from Chinese stocks performing well this
year in fact we're finally seeing
something we haven't seen in quite a
while Emerging Markets have been
outperforming stocks from developed
markets in 2024 so far and I wouldn't be
surprised to see them continue to
outperform for a while as they have some
catching up to do when looking at the
past few years compared to stocks from
developed markets either way I'm happy
that a simple ETF investment strategy
where my wife and I just buy a single
ETF the Invesco foi o on a monthly basis
covers the entire world including stocks
from Emerging Markets like China
according to their market cap as I never
want to ask myself a few years or
decades down the line if we made the
right decision by excluding a specific
region I'd rather own all of the most
productive companies from the entire
world no matter in which country they're
based in now and in the future as I
mentioned in the intro the ECB cut
interest rates again about 2 weeks ago
which means the short-term deposit rate
now stands at 3.5% per year since trade
Republic is still passing it on one to
one without taking a cut in September we
earned a total of €95 in interest on our
cash reserves there secured by € 100,000
bank deposit guarantee plus once again
an extra €1 15 from the 1% save back
using the trade Republic card for all of
our expenses as a family according to
the financial times we may sadly see
another decrease in rates as soon as the
middle of October due to low growth in
the U and likely also because inflation
seems to now be under control while it's
disappointing to see rates continue to
drop from a high of 4% Just 4 months ago
I think this shouldn't come as a
surprise after all very few of us me
included ever expected them to go that
High to begin with now let's quickly
take a look at my highly speculative
small allocation to bitcoin which I
somehow always get negative comments
about whenever I mention it I get it
some people hate it with a passion and
that's okay but I want to be open and
transparent about what I choose to hold
in my personal Investment Portfolio so
here we are Bitcoin had a great month
finishing up around 7.8% and sitting at
a year-to-date return of 49.7% so far in
2024 based on its historical returns
October and November tend to be some of
the best performing months for Bitcoin
so I do have high expectations but let's
see what happens as for our overall
investment strategy my wife and I are
not planning to change anything no
matter what happens before us elections
or who ends up winning we'll keep buying
a single ETF covering the footsy or
world at the start of every single month
via automated recurring Investments and
whenever I have some extra cash to
invest since I am self-employed and
don't make my money on a fixed date each
month and while the vast majority of our
monthly savings are going into that one
ETF we're planning to keep investing
around 10% in Bitcoin as a speculative
high-risk bet using bit bble allocating
to this risky asset has worked very well
for us since 2017 in addition to ETFs
but it's of course not for everyone then
by the end of the year we'll see where
things stand and if we need to do some
rebalancing so that we're not taking on
more risk with our overall portfolio
than we're comfortable with longterm all
right before you take off don't forget
to gently tap the like button if you
enjoyed the video and to subscribe if
you haven't yet if you'd like to support
me feel free to use my links in the
description below to the best Locus
brokers in Europe for ETFs and other
Financial tools I use none of what I
talked about today was of course mous
investment advice I'm just sharing my
personal opinion based on my own
experience as an investor thank you guys
so much for watching have a wonderful
day and until next time
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