Please find below our “Weekly Market Update” as at 10th January 2020
Blue Sky Comment
In our last bulletin, following the issues in Iran, we warned that investment markets may be choppy but we didn’t see reasons to veer from our short term outlook, at this stage anyway.
This is not to underestimate the possible implications for what’s happening in the Middle East but in investment terms, so far, there has not been a major reaction to the conflict. In fact the S&P 500 has risen over the last week, the FTSE 100 has moved sideways and the oil price has slipped from its near term peak of last Friday.
On Monday of this week, It was with interest, that Gary Neild visited LGT Vestra, 7IM & Foresight, to glean the latest views from our strategic investment partners. Without exception they were upbeat but as always, with a degree of prudence. What is interesting is the changing dynamics of the investment landscape. Be it with regards to environmentally friendly investments or the vast amount of infrastructure projects underway and what was striking, is how quickly change is happening.
LGT Vestra spoke about how they would like to demonstrate the positive impact their strategies make on the environment, not just be classed as being Sustainable. Foresight highlighted a range of opportunities, particularly on a global scale, one being vertical farming. Last night on the One Show, a feature was shown about how this could revolutionise food production, particularly in the developing world.
When talking to 7IM, whilst discussing the future, they showed Gary a table (sourced from Research Affiliates) which states the top ten companies by capitalisation, at the start of each decade, going back to 1980. What was very clear is how there was a dominance by certain sectors.
1980…it was oil companies that dominated with the likes of Exxon Mobil, Standard oil, and Shell leading the way.
1990…it was the turn of Japanese banks in the form of Bank of Tokyo, Fuji Bank & UFJ Bank although they were interlaced with other dominant Japanese companies like Toyota.
2000…along came Microsoft, Cisco Systems, Wal-Mart and Intel corporation
2010…we saw commodities gaining traction as the global economy recovered from the financial crisis. Petro China, BHP Billiton, Petrobas although Microsoft were still in the mix along with Apple Inc.
2020… as we enter the new decade, it wont surprise you that Microsoft and Apple are still there along with Amazon and Facebook.
Of course, it makes you think what the dominant sectors are going to be in 2030. Technology will undoubtedly play a big part but I suspect healthcare, infrastructure companies and environmentally positive companies will also feature. Banks may also come up on the rails as they adapt to the changing world of how economies and companies operate.
Throughout these decades of course there has been huge variances in the fortunes of certain sectors and indeed companies but with the increasing rate of pace of change, there could be a few surprises.
Rapid change lends itself to active management which is what we are all about here at Blue Sky.
Have a good weekend.
Blue Sky Investment Team