Business

Now, with the pound at rock bottom, it’s time to buy British again

But back in the business world: How well did our readers benefit from our May advice for buying US stocks, and what is the best way to deal with the new conditions financial markets find themselves in?

The first US stock we introduced in the Questor in America series was the Mastercard. Its shares are down 20 percent in dollars, but thanks to the drop in the pound, its shares are down just 6 percent relative to British investors.

Related numbers for our other tips in the series are Alphabet (17 pcs fall, 2.6 pcs fall), Nike (14 pcs fall, 2.4 pcs fall), Newmont (38 pcs fall, 29 pcs fall), Procter & Gamble (7 pcs fall, profit 7 pieces), Rhythm Design Systems (3 pieces win, 15 pieces win), Sumero Enterprises (6 pieces win, 19 pieces win), Zoetis (16 pieces lose, 5 pieces lose), IBM (5 pieces win, 7 pieces). piece), Philip Morris (11pc loss, unchanged), Tyler Technologies (9pc loss, unchanged), Golar LNG (14pc loss, 7pc loss).

Read:the S&P 500’s Capitulation Event Due in 2003 Warns PIMCO and BNP Paribas

In Questor’s view, it no longer makes sense for readers to invest their money in US stocks: to buy those stocks, they (or their broker) would need to buy dollars, and their pounds wouldn’t buy many dollars at the moment.

Those who followed our previous US advice (and we’ve been throwing in US stocks now and then for years, before our weekly Wall Street recommendations) should certainly hold their own: they now have some currency diversification in their portfolios, which we see as a good, even necessary, thing. , in the current turmoil.

It may be best for bargain hunters to look for home beaches. One interesting aspect of market movements in the days following the mini-budget is that the relationship between stock prices of multinational companies listed in London and the exchange rate has broken down.

Read:Electricity generator SSE proposes plan to help with household bills

In normal times, Sterling is boosting the FTSE 100 index, all other things being equal, because many blue-chip companies are making a lot of their money offshore. Those outside gains become more valuable if the pound falls. But last Friday, the British pound and the FTSE 100 both fell sharply and the blue chip index stands below 7000 – close to the level it first reached in 1999.

Koestor notes the echo of what happened after the Brexit vote: then the pound fell dramatically, which should have supported the FTSE 100, but it also fell into a state of shock – at least initially. Then the investors remembered the correlation between the exchange rate and the profitability of the blue-chip companies and the recovery of the index. If readers were quick they might benefit from the same phenomenon now.

Among the multinationals generating income here recently are Shell, which is down 5% since we recommended it three weeks ago despite the weak pound, Anglo American (7% down in five weeks) and Smith & Nephew (7% since early August) ).

Such stocks seem a better bet in the current circumstances than using our cheap pounds to buy expensive dollars to invest on Wall Street, especially since markets tend to overreact and may decide to push the pound higher. So we’ll be suspending Questor in America for now and see how things develop over the coming weeks and months.

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The broader lessons remain: it is better for investors to monitor the currency markets and diversify their holdings into different currencies to improve the resilience of their portfolios in the long term.

Read Questor’s latest column at telegraph.co.uk Every Sunday, Tuesday, Wednesday, Thursday and Friday from 6 am.

Read Questor’s investment rules before you follow our advice.

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