At +11.13%, July was finally another good month for Western stock markets and also for the AEX, after a months-long period of weakness.
RVM STRATEGY
RVM Strategy had a result of + 1.37%, relatively average for this system. There were no special features.
RVM RETIREMENT
At RVM Retirement, the patience that must be exercised when following this system paid off. A retrospectively reasonably well-timed repurchase of old interests and purchase of new interests began to pay off nicely in July.
RVM Retirement had a monthly result of 8.80%. This consisted of the combination of a decent increase in the value of the longer-term holdings, and a slightly larger gain than RVM Strategy on the momentum strategy.
Particularly interesting in this regard was that prices rebounded in June from a 2022 support level calculated by our algorithm. This calculation was made months ago and now that it has proved to work well, we can only be satisfied with our methodology.
OUTLOOK
For us, nothing has changed. We had a positive view of the stock market and we still do, albeit to a slightly lesser extent because of the sharp recovery we saw in July.
The most interesting question we received in the month of July had to do with predicting stock market and/or economy.
People known as "experts" are often asked at the beginning of a new month for their thoughts on the market. Those experts have been mostly negative lately, including in July. In addition, doomsday predictions can be read everywhere, every day, not from laymen, but from experts.
The interesting question was to us, "We regularly read not such a nice outlook for the economy and inflation. How do you see this? And what can you recommend as protection against inflation?"
Let's get into that.
"Not such a bright outlook for the economy and inflation," that first.
The honest answer is, we don't engage in this. Why not? That there is a lot going wrong in the world, we know. Every day the news pages reported new blackmail practices by Russia against successful European democracies and new atrocities and massacres of Ukrainians committed by those same Russians.
This is also economically important. Russia's terror leads to sharply higher gas prices and in general higher energy prices, When energy becomes more expensive, many other products also become more expensive.
But this inflation caused by war can also be over in a flash. There is nothing predictable about it.
In general, this is true: both the economy and inflation cannot be predicted.
This is not so much an opinion, rather an observation from a lot of statistical observations.
We can take the central banks FED and ECB as examples.
These central banks officially have a mandate to ensure price stability. They therefore have their models for this, which must be predictive. Their interventions, in turn, we as market followers and managers must 'predict', which we try to do to the best of our knowledge. But again and again it turns out that in hindsight the FED and ECB were too early or too late, and that they did too much or too little.
Paul Volcker's substantial intervention in US interest rates in the 1980s as president of the Fed was bold and at the time there were plenty of people who considered it irresponsible. The outcome of his policy was not predictable, inflation had to be contained, but whether it would succeed in this way?
Now he is praised for what he dared to do, but that is hindsight.
So, as managers, we cannot predict anything about the economy and inflation. We can identify a certain trend, but that is something else.
Then the second part of the investor question, "What can you recommend as protection against inflation?"
The answer lies closer to our expertise: owning shares.
Specifically, we recommend buying stocks in companies that the investor can assume will be able to sustain margins in an inflationary environment. The numbers season has already shown that there are many companies that are able to sustain margins.
Also, companies that have proven to be able to raise dividends every year are good candidates for a portfolio that is able to keep up with inflation.
Traditionally, commodities in the portfolio have also been considered a defense against inflation. This is certainly not a bad idea either, although commodities do not pay dividends, a downside.
However, the most important weapon against inflation is owning a paying job. People who participate in the workforce may hope that employers are able to offset inflation through higher wages.
But we as administrators obviously cannot provide that.
We can only serve you in the best way possible by increasing your money in a responsible way.
As always, you are welcome to join RVM Strategy and/or RVM Retirement.
Many people have gone before you!
Sincerely,
Ruud van Megen