I hope that you’re enjoying the last few days of this lovely weather this season! The stock market seems to become more volatile again as we’ve entered Quarter 4 of this year.
Are you prepared for a wild ride?
This and more in today’s 5-Bullet Sunday, #40.
Having said that, enjoy today’s edition of 5-Bullet Sunday and as always, have a lovely remainder of the weekend!
5-Bullet Sunday is a weekly blog post with 5 topics that were on my mind this week related to Financial Independence and Dividend Growth Investing or something that just fed my curiosity. An overview of earlier posts can be found here
Q3 Portfolio Performance
I’m not too happy with the performance of my portfolio because of the increased risk of dividend cuts. I had a relatively large allocation to Oil & Gas in my portfolio and a company like ExxonMobil is really down a lot.
$XOM is yielding 10% right now and this is often a signal that the market expects a dividend cut from my experience. A dividend cut in ExxonMobil would hit my portfolio cash flow, so I wouldn’t be too happy with it. However, balance sheet-wise it still ticks the boxes for a decent investment, hence why I’m so confused with this position. Sometimes I’m even thinking of doubling down at these price levels 😵
Nevertheless, the good news is that my Cash Flow from projected annual dividends has increased again over the last quarter and my actual net dividend income grew 29% year-over-year 💪
My portfolio value itself stayed relatively flat. As mentioned before, few oil & gas stocks dropped quite significantly and on top of that the US dollar depreciated by approximately 6%. Growth in few tech related stocks and new investments (i.e. Danone) resulted in a flat portfolio value.
You can hear more of my thoughts about my Q3 portfolio review in this week’s Dividend Talk podcast (or via podcast providers).
Out of curiosity: how did your portfolio perform? Let me know in the comment section below this post.
Q4 Climax or Anti-Climax?
As some of you know, I’m a bit cautious about all the big events that are upcoming in Q4 and what it might mean for the stock market. Therefore I slowed down my investments to “just” my minimum monthly contributions. This allows me to still benefit from dollar cost averaging, but at the same time I’m adding some money to my war chest again.
There are 3 events that I think can bring a shock to the European / American stock market and I’m listing them in order of priority 👇
Biden wins the US presidential election
As discussed in the podcast, I believe that there’s a 50/50 chance that either of the candidates wins. I know that Biden is ahead in the polls, but one thing I learnt from the 2016 elections is that a lot can change in the last 2 weeks.
As mentioned before, I believe that there’s a Trump premium in the market, because he uses the stock market as a yardstick for his success. It’s the single thing he seems to measure and it often looks like that everything he’s doing is orchestrated to push the S&P 500 up. I wouldn’t be surprised if his 401K is fully allocated to $VOO. At the same time Biden is promising tax increases which would mean an impact to corporate earnings.
My hypothesis is therefore that the stock market could drop 20% if Biden wins.
PS: Needless to say, but Trump having Covid-19 and dying from it could be the ultimate Black Swan, but I’m counting on him to get healthy again with all the medical support he has.
Covid-19 strikes back
Autumn has started in many countries in the Northern Hemisphere and an increase in Covid-19 cases is already visible in Europe 👇
I don’t believe anymore that we will see a full lockdown like we had back in March and April. We know much more about the disease now and societies are much more effective in their response.
I do expect lock downs in certain hot spots and therefore I think that the economy will still be impacted. The “human-contact-economy” might stay lower-for-longer if we get a true second wave. The question is how much governments are still able and willing to do?
Therefore I do foresee an economic impact if we get hit by a strong second wave. Job reports might look ugly and claims on social security might increase. All in all this would mean lower consumer confidence and spendings which would hit the real economy, hence the stock market.
The Brexit Saga
Will it finally come to an end? Not having a deal can really be a pain for both Europe and the UK. The BBC has outlined the impact of a no-deal pretty well in their article.
…if a new UK-EU trade deal is not agreed in time then tariffs and border checks would be applied to UK goods travelling to the EU – under the rules of the World Trade Organization. The UK also decides what tariffs and checks to impose on EU goods.
Tariffs would make UK goods more expensive and harder to sell in the EU, while full border checks could cause long delays at ports.
Failure to reach a deal would also result in the UK service industry losing its guaranteed access to the EU. This would affect everyone from bankers and lawyers, to musicians and chefs.
So far the EU and the UK delayed getting to an agreement time after time and maybe they will do something like that again. I personally wouldn’t be surprised at all by that.
The risk as outlined above is real and we will know more by the 15th of October. Most people seem tired of this discussion and are taking any news for granted. This is why I believe that it has the potential to shock the stock market if there won’t be a deal before the end of the year. The risk above would hit the real economy, especially in Europe and the UK.
Dividend Talk Podcast – Wow, people (you) are actually listening to us!
Engineer My Freedom and I connected for the first time earlier this year via Zoom and we noticed that we both love talking about dividend investing. What really connected us were the topics that really matter to us as Europeans, i.e accessibility to ETF’s, European Dividend stocks, Taxes.
This is where the idea for a podcast was born. We both spoke about our hunger for more dividend talk inspiration, but then from a European perspective. We couldn’t really find it online, so in an impulse we just decided to record ourselves talking about dividend stocks.
We quickly created a format thinking about what we’d like to hear, but at the same time we also know that we aren’t professional investors. Hence why we rather see ourselves as two random guys talking about dividend investing as if were in a pub with a large pint on a Friday evening.
We then recorded our first podcast episode as a try-out. We were both a bit nervous with no professional equipment. It’s actually quite funny, because we were expecting that not so many people would listen to us anyway.
Well, we were wrong! We straight away had approximately 100 people listening to us! Just imagine how big the pub would have to be to fit 100 people in there. It just blew our minds.
Fast forward to today: we have 16 episodes published. Our wives got used to having a Friday evening alone watching their movies that we don’t like to watch anyways and the boys are having fun talking about dividend investing 😉
But it gets even better:
- we just reached 100 YouTube subscribers on our channel (subscribe here) 🎉
- we have approximately 320 Followers on the different podcast platforms (i.e. Spotify, Apple, Google)
- we are nearing 1000 weekly views
I can tell you that we’re really humbled about it and it excites us even more to keep on going!
But things get even more better!
We have just been ranked #14 on the list of 75 investment podcasts you must follow. Both EMF and I can’t take it too serious, because we are listed above the Dave Ramsey show, but nevertheless it makes us very proud!
Let’s make a screenshot for our grandchildren like a picture of teletext in the good old days when you’re favorite football club was on top of league after the first round 📷
Thank you once again for all your support. We especially love your engagement and answering your questions. This podcast is not only about EMF and I having fun. It’s also about you and serving the European dividend investors community. Therefore and as always: any feedback is more than welcome 🙏
This time I would just like to recommend reading the Snowball: Warren Buffett and the business of life. Winter is coming up soon and we might need to stay more inside than we desire. This book is the perfect book for a long winter, because it has approximately 1000 pages 📕
Is there anything better than one of the best investment books in your favorite armchair near the chimney?
PS: You can find this book in most of your favorite online book stores.
Many of you seem to wonder about what to do with Oil & Gas stocks. Honestly, I might not be the best to ask, because as mentioned before: if you’re looking for a role-model in someone that made lot’s of money in it, then it’s not me 😉
Having said that, if you want to inform yourself more, then I found the below video from Chuck very interesting.
That’s it for the week. I hope that you enjoyed this week’s 5-Bullet Sunday 😍
As always, have a lovely week ahead!
PS: don’t forget that every comment = 1 Euro to Kiva.
European Dividend Growth Investor
I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.