Good morning!

Markets have been all over the place again since the UK closed yesterday afternoon. The US plunged again, but not quite as badly as a week ago - somehow a 470 point drop in the Dow last night doesn't seem such a big deal these days!

The Futures are showing that the US is expected to recover about a third of that when it opens today. The price of oil is lurching all over the place too, with a big percentage rally, now apparently fizzling out. So nobody really knows if we've just had a dead cat bounce, and are on our way to further falls, or if we're just re-testing the lows for another buy the dip opportunity?

At the moment I'm feeling reasonably relaxed about my long term portfolio of UK small caps - the recent sell-off showed most of them to be resilient, and the ones that did fall, quickly recovered. Also, the sharp falls showed which shares were the strongest, with several in my portfolio not dropping at all - so if buyers were absorbing all the sells during a market sell-off, then the future looks bright for those particular stocks.

As always, I think it's all about holding decent companies, at reasonable valuations, then providing the fundamentals of the company remain strong, the share price should look after itself in the long run.


Halfords (LON:HFD)

Trading update - it's not a small cap, with a £1.02bn mkt cap last night, but the shares are down 9.5% today to 462p. This news looks topical, and might have read-across for other retailers possibly, so I'll mention it.

Halfords has a 3 April year-end, so its Q1 figures (Apr-Jun) were reported on 15 Jul, and looked good, with group Like-for-like (LFL) sales up 3.5%.

Today however, the figures for Q2 to date (Jul-Aug) are reported, and they show a marked deterioration - LFL sales are down 1.3%, with cycling being the problem category, reporting -11.0% LFL sales (compared with +2.0% in Q1). That's some drop in demand for cycling. Reasons given are: more discounting (i.e. competitive pressures), and poor weather.

I've been wondering how long it would be before retailers started blaming the weather for disappointing sales! I suspect clothing retailers will probably be OK, as they hold summer clearance sales in July (when the weather was alright in the UK), and so August is…

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