Good morning!
Very quiet for small cap results & trading updates today, but there's still plenty of news to digest re Greece, and the continuing market crash in China (down another 10% overnight, but bouncing back about half that at the time of writing). We have to think about these things - how do they affect our investments?
I really cannot see why an entirely speculative boom & bust in the Chinese stock market should have any impact at all on the price of UK small caps. It's not as if we export much to China is it? Also, I'm not aware of any UK small cap investors in my network who buy Chinese stocks. Indeed, experience of how dreadful Chinese AIM stocks have been, has very much put many of us off looking any further at Chinese investments! So overall the crashing Chinese market seems fairly irrelevant to me, other than perhaps making one or two people here a little more nervous than they would otherwise be.
Falling oil prices have historically been very positive for Western economies overall, so again I'm not worried about oil prices falling further. It's mainly oil/resources stocks which are pulling down the FTSE100, as it's so overweight in those sectors. If you don't invest in resources stocks (or their support companies), then I don't see how any of this really matters. Cheaper oil puts more money in the pockets of consumers, and lowers transportation & raw materials costs, so for the sort of companies I invest in, these macro factors are actually a good thing.
It's Budget day today of course here in the UK, so I'll be watching the coverage of that over lunchtime, and pondering how it might affect my investments, and perhaps any investment opportunities which might spring to mind.
Although I think we're already aware of the general bullish themes, of increased housebuilding, recovering household confidence & spending, and improved business optimism & capex. So in my view the macro backdrop for UK shares is quite positive at the moment - we've probably got several years of solid growth to come, so I'm generally keeping focused on companies which are enjoying a cyclical recovery. In particular, brokers often under-estimate operational gearing (both on the way up, and the way down), so you can find some companies reporting profits ahead of expectations at this stage of a recovery.
