Please find below our “Weekly Market Update” as at 3rd January 2020
Blue Sky Comment
A new year, a new dawn?
Firstly, a very happy New Year to all our clients and followers. I hope you had a lovely festive period.
Yesterday we had a skeleton staff here in the Blue Sky offices. All was very relaxed as we caught up on what had happened over the holidays. We looked back at how the investments markets had responded since the election and how they finished towards the end of the year – pleasing returns which have been acknowledged by many clients. We then held a series of strategy meetings preparing for the year ahead and already we have implemented some changes, intended to further improve our offering to you, our clients.
Just for your information we have no thoughts of recruiting any further members for the team having welcomed Angela Wood at the beginning of December. As a result, we won’t be advertising for any ‘wild cards or weirdos’ soon… you really can’t second guess what’s coming next in British politics!!
Neither can we guess what’s likely to happen in the investment markets. Yesterday was a really positive day for equities, and all seemed well in the financial world. The comment was made in the office that there was no foreseeable bad news on the horizon, yet this morning we wake up to the news that Iran’s top military leader has been killed in a deliberate US drone strike and financial markets are nervous once again. Oil prices have responded with a near 4% hike and safe haven assets have risen whilst equities in general have fallen.
There will, of course, be repercussions and tensions will escalate. As we know investment markets don’t like uncertainty and so we expect them to be choppy for a while. A balanced portfolio, however, has the benefit of holding safe haven assets such as gilts and US treasuries which lowers such volatility. We have also introduced strong infrastructure holdings which have a low correlation to such international conflict.
Looking forward, we see a reasonably steady half of the year but there is no doubt that equity prices aren’t cheap, although there are pockets of value such as domestic stocks in the UK, even after recent price rises. Emerging markets look attractive if bought for the long term and it may be that US Treasuries come into their own if political uncertainty prevails in the US; a year in which we may see Donald Trump re-elected in November… but maybe not!
We very much favour a themed approach through technology, health, infrastructure, and sustainable investments, although these assets will be interlaced with other assets, the weightings are dependent on market conditions.
It just goes to show that we can never be complacent, and it reinforces what I’ve stated before – that now is the time to have an active investment approach if you want to sleep soundly at night!
I’m off to meet with our strategic investment partners, LGT Vestra, 7IM, and Foresight on Monday 6th January and we will update you with a quarterly investment update in the next couple of weeks.
Chair of the Blue Sky Investment Team