Please find below our Investment Market Update as at 17th July 2020.
Blue Sky Investment Market Update
A different perspective
Many of our clients were able to join our Infrastructure seminar this week, and the feedback has been very encouraging. Many thanks to Nigel and our friends at Foresight for sharing their knowledge and understanding. The two funds that Foresight run for us remain key to our investment approach, delivering good potential returns, diversification and providing a defensive resilient performance.
Infrastructure is such an interesting and wide ranging set of assets, with more well-known renewable energy production to vertical farming, student accommodation and solar power. Nigel told us of a brilliant idea whereby they place a reflective stone on the underside of solar panels in Spain to collect the sunlight conventionally then reflect back even more of the sun’s power via the stone. It is this type of innovation and creative thinking that makes Infrastructure so much more exciting than the name would suggest!
We have covered Infrastructure in a number of recent market updates, but one last important point is around dividend income. We all know that many companies have reduced or removed their dividends and against this backdrop, across all the investments Foresight have made in the UK and Globally, only two have reduced their dividend – and then only very slightly. This can only make this an even more enticing investment opportunity.
Signs of positivity
The glorious weather today is matching a good week for World stock markets, with all but China trending gently higher. This is despite the well-known issues all remaining; the economic effect of Covid-19, trade tensions and a looming US election! We think there are three main drivers at present giving the markets some relative strength:
- Markets are forward looking and to some extent, current challenges are built into prices already
- We have heard more positive noises about a vaccine
- Pension funds, sovereign wealth funds and asset managers are holding near record levels of cash which needs to be put to work.
In an extended period of low interest rates and reduced options, many commentators believe that the best way of achieving positive returns is through the stock market. We share this opinion but as always tempered by diversification and investing at your personal level of comfort.
On the European stage
The European leaders are together for an economic summit today and tomorrow, to take their proposed recovery plans a step forward. Since this was mooted on 18th May, European markets have risen 13% – so much of the good news may once again already be priced in. Beyond any immediate effect, the potential exists for this to create more European solidarity and a framework for future risk sharing. This is important as it lends some German economic power to less stable nations, in turn improving their outlook. Combined with Europe appearing to be making good progress with their Covid recovery, the Continent’s prospects are relatively brighter than they have been for a while.
We mentioned that the Chinese markets are the only major index not to have risen this week and this is despite their avoiding an official recession this quarter. There remains significant scepticism about the accounting of these numbers, hence the market fell on the news of improved 2nd quarter growth.
Right, I’m returning back to the delights of Blackpool now… I’m having a few days away visiting family.
Have a wonderful weekend,
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.