Trading Seasons
It’s been a dull week. The adage of ‘Sell in May and Go Away’ may be true. This phrase refers to an investment strategy for stocks based on the theory that the stock market underperforms in the six months between May and October. The period between November and April sees much stronger stock market growth.
The market is in limbo and trying to figure out what to do next. The clouds are parting in the economic landscape, but investors are worried about stepping into the sunlight.
Inflation in the UK is still high, but the Bank assures us this will be tumbling to the downside soon. This theory has a timeline that extends regularly, but confidence by the BoE was reaffirmed by hiking interests up again to 4.5% from 4.25%. I am happy I only have one (now unprofitable) property on a tracker mortgage). The Bank has an “optimistic outlook on the economy” whilst rejoicing that the UK grew by 0.1% from January to March, which means no recession. Does life feel all rosy again?
The situation in the US is also just as weirdly indecisive, where inflation is cooling. but, worries of recession are intense, with many investors slating Jay Powell, the FED chairman, for unnecessarily raising interest rates that may drive the economy into certain doom. The old argument surrounding raising the debt ceiling is also back for the 78th time, holding investors back.
My short-term trades have all stopped because of the market’s choppiness from traders acting like headless chickens trying to understand what’s happening. Did we ever have a normal market? This negativity has been going on for so long that I have forgotten what a bull market feels like.
Share Price: 505p
Market Cap: £505.08m
This once star of the UK stock market has well and truly fallen from grace.
I was shocked to read Asos’ interim results this week, many predicted pain, but this was ridiculous. Sales fell by 8% (Estimated was -3%) and a loss before tax of -£291m, reducing margins, no profit, no free cash flow, and higher debts with no way of paying them off anytime soon. But don’t worry; management says they have a plan through the Acceleration of ASOS Brands strategy.
I watched in ore at the raises in the stock price from 2010 to 2014 and then again from 2014 -2018, but I now believe this remarkable stock appreciation on the chart was down to Asos selling a story better than they sell clothes, a story now many have lost faith with.
Asos jumped on the bandwagon along with many others that saw the future online; ‘shops are out, internet shopping is in’. This enabled the shopper to order five pairs of jeans in various sizes, returning the four that made their bum look big for free. Only recently have these fashion retailers accepted that this business model does not work. Many have tried to fix the problems with weird and wonderful ideas, such as black-listing customers, but are now forced to face reality and need to charge for returns.
It now appears the purchaser would rather take a trip out to perform some old-style shopping in an actual store, with actual people, where one can browse the goods, ask questions, try things on for free and have a Costa Coffee instead of acting like some hermit waiting for a doorbell then parading in front of the mirror like some Buffalo Bill character.
The return to stores has been confirmed by other companies reporting recently, such as Card Factory and Next, who offer omnichannel business models, something Asos needs to include more of after mostly going all in online. These shopping habits could also be changing as a result of lockdowns where humans realise what social beings we are.
Seeing customers back on the streets and in the town centres is terrific. HMV this week announced its return to the high street after witnessing the change in demographics. Will we see more of this? Bring back the Woolworths! traditional
I have not seen anything else that has raised my interest in the UK investment scene this week. After being stopped out of my short-term trades, it is now time I sit back, maybe in the Costa del Sol. I will watch the market and wait for it to show me a direction supported by volume. Trading is about patience. We do not need to be in from the beginning of the market moving up. It took me a long time to get my head around this. I trade pullbacks and retests in a market with momentum, whether to the upside or downside.
Hopefully, next week, I’ll be more positive. Things change so quickly these days.
