September proved to be one of the more volatile months in this calendar year, starting out the month continuing the solid performance from August. However, by mid-month fear was taking over the markets again.
Evergrande
The Evergrande Group; China's second-largest property developer, with it's $305 Billion debt - yes you read that right, I said Billion - looked set to default on it's interest payment. This sparked fears that the company would collapse and the knock-on effect could be catastrophic for markets worldwide owing to the sheer size of the company. Whilst they managed to meet their obligations in the end, the damage was already done. We will need to keep a close eye on developments going forward as they're not out of hot water just yet.
Fears eventually subsided to more rational thoughts, but not before the second fear monster of the month arrived.
U.S. Government Shutdown
Adding to the existing fear around inflation, the U.S. Government faced another potential shutdown. Lawmakers grappled with setting budgets the government wanted to pass and perhaps most importantly, with the decision to raise or suspend the debt ceiling in order to avoid defaulting on the country's debt (anyone else see a pattern here?).
The budget needed to be passed for government spending otherwise there would be another shutdown.
Of course, with divisions within the Democrats causing a political impasse it came right down to the wire which further stoked the fears. Despite suspending the debt ceiling and avoiding a government shutdown, once again the damage had already been done.
So the month of September had a terrible final few weeks and perhaps most interestingly, the sole driver was simply fear.
As Warren Buffett so excellently put it...
"Be greedy when others are fearful"
All this fear driving markets down provided some fantastic opportunities to invest, including opportunities for anyone aiming to copy my portfolio or indeed any portfolio set up for long-term success. Check out my profile here: ElevateInvesting - Etoro
September unfortunately saw us finish red with the strong early performance staving off the worst, finishing at -2.7% on the portfolio.
As mentioned in my previous update some consolidation was carried out early, closing some weaker positions that performed less well than expected such as Astra Zeneca, Eon, Cisco and BioRad; taking these small profits and using the capital to strengthen positions such as Diageo, Lloyds, HSBC, Starbucks and GSK towards month end at 'peak fear' and with many of the additional positions showing strong performance already into the start of October.
One of the highlights was closing our Hasbro trade at a profit of 20% on September 1st, watching the price fall at least that much at peak fear, before picking up a stronger, renewed position at month end in time for the run through the Christmas period.
Finally, a note that as advised in previous updates, the cash balance (equity) in the portfolio was increased by 1.05% and I expect this to be the same on the last working day in October.