The last 3 months of 2018 were brutal for stock markets and made Game of Thrones look like a CBeebies special. The FTSE 100 fell by around 7% in 90 days. However in the first 3 months of 2019 it has bounced back, recovering all of that lost ground. And investment providers are largely upbeat about the UK prospects ahead.
Why? Well, one school of thought is that the longer that bloody Brexit rumbles on, the more likely it is that we’ll end up with a closer relationship with the EU, avoiding the hard Brexit prospect that spooked markets and slapped Sterling in the face last year. Of course so much of how markets behave is about confidence and psychology, not any great underlying economic logic, and so improved confidence could give home-grown companies and shares a boost.
Our love affair with tech stocks continues. Uber is aiming to float in May and is reported to be pricing its shares between $44 and $50, raising between $8 and $10 billion. This IPO (Initial Public Offering) could value the company at around $90 billion. This would make it the second biggest float ever in the US, after Facebook which raised a cool $12 billion back in 2012.
So how does a valuation of $80-$90 billion for the loss-making taxi firm which owns no taxis stack up? Microsoft clocks in at around $990 billion, Apple is worth about $970 billion and Amazon about $936 billion.
Amazon’s world domination continues as the firm yesterday reported that profits had doubled in the first three months of 2019. Q2 is all about cutting delivery times for US Prime customers from 2 days to 1 day, as they target revenues of $60 billion for the quarter. But this is not just a US story –interestingly they’re seeing the fastest growth of Prime membership in India – more than any other country.
These brands appeal to us – we instinctively like investing in consumer brands which we feel we know and understand. But don’t feel that you need to rush out and try to get your head around the boring and arguably risky intricacies of buying individual US-listed shares.
Chances are that most of us own some of these shares anyway – they’re just so big that they work their way into most investment funds and pension funds. A typical mixed bag of global shares will have around 30%–50% in US shares – on this basis, for about every £1 you have invested in a similar global shares pot, you’ll have about 4p split between Microsoft, Apple and Amazon. If you’ve got a pension at work, check out what lies beneath the bonnet – you’ll likely have some of this stuff in there.
If you want to own a collection of large US shares, then have a look at an index fund. As an example, I’ve held the HSBC American Index fund for ages and at 0.06% a year, you can’t really argue with the costs
P.S. We have launched our 2019 Consumer Investment Awards in partnership with the The Times and The Sunday Times. Most of the winners are decided by customers, so if you use a particular investment provider and want to have a say, please take a few minutes to add your vote to the mix. Winners announced in paroxysms of excitement on 5th June.
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