Please find below our Investment Market Update as at 21st August 2020.
Blue Sky Investment Market Update
“The recession is over!”
This was one of the main messages I gave to a business owner audience at The Boardroom Network earlier this week.
I was asked to be the keynote speaker (sounds important) with around 30 business owners attending. Normally, this networking group has about 100 in attendance but due to Covid restrictions, numbers were strictly limited.
The talk was filmed and so I wanted to share it with you too. It acts as a summary of what I’ve been writing about over the last few weeks. Click below for the raw uncut version… which happened to be interrupted by a gust of wind sending my papers flying!
My main messages were as follows:
- Business leaders need to grasp opportunities and spread the word of positivity
- We need to change the mindset and not be anchored in doom and gloom
- The recession is over. We have just had a positive quarter of GDP… it’s just not a convenient quarter in calendar terms!
- Change is happening at pace – it’s important to be part of it. There is an opportunity to build a better future; a more inclusive and diverse society, whilst looking after the planet in a more responsible way
- In terms of investments, there are an abundance of opportunities across the health, technology, infrastructure and sustainable sectors – stimulated by capital expenditure. Sustainability is cropping up everywhere!
Signing off, I stated “change can be daunting but done properly, it can be the start of something truly amazing”.
Positivity breeds positivity
The opportunity for this talk arose when Juliet, an Ambassador for us at Blue Sky, heard a talk I was giving to the team. She thought it would be a good idea to kick off the return to face-to-face business networking with a dose of positivity.
And, let’s face it, after what we have all been through in the past 5-6 months, we need it!
The talk was entitled “Viewing through different lenses” as it’s my view that business leaders have an opportunity to drive positive change as we come out of this crisis.
The Coronavirus has shaken the world to its core, testing healthcare and welfare systems, our societies and economies and our way of living and working together.
Whilst it’s been very difficult out there, we mustn’t be coerced into thinking that we are all doomed… far from it. Some businesses are thriving.
The recession is over
The recession is over. It just hasn’t been announced yet. We won’t be officially told until sometime in November.
In fact, if lockdown had occurred in April, we wouldn’t be in a recession because the first quarter would have shown positive growth: a recession in UK terms, is of course two quarters of negative growth.
In May we saw GDP growth of 2.4%. In June we saw growth of 8.7% and in July? Well, it’s likely to be better still. Technically we may not be, but in practice we are.
Each industry or sector, each company, has its own challenges but we have to try and extract ourselves away from the avalanche of negative news.
We should anchor more on what lies ahead. Last week the Bank of England’s Chief Economist said the foundations had been laid in the UK for a rapid recovery. I didn’t hear this reported widely in the news, did you?
So, how about we all start telling our friends and loved ones that we are out of recession? I accept that it’s the deepest recession in history, but it may also be the shortest because it wasn’t caused by an economic crisis but a health crisis.
Economic data and stock markets
It’s important to understand too that economic data is backward looking – it’s old news. Stock markets look forward and so should we. I don’t know whether you are aware but the US stock market is close to an all-time high.
Now, how can we have the deepest recession in history and have record stock markets in the US? Unusual times indeed!
For me, I see this as ‘our time’ as business leaders – we have a choice to wallow in what’s going on in the press or grab the mantle, educate and steer everyone through the mire.
Change is in the air
As we emerge from the extremes of the pandemic, I sense that a real commitment to change is in the air. Not just because we are getting out and about and businesses are emerging from hibernation, but I sense something more marked. There’s a keenness to ‘build something better’ – a more inclusive and diverse society.
In the short-term, of course some will focus on survival and getting businesses back to normal, but improvements in business resilience and long-term growth will likely only be achieved through the adoption of more sustainable and resilient business practices.
Sustainability is a key word at the moment and is embracing many aspects of society.
Environmental and Social Governance is cropping up everywhere and those companies which embed these principles are proving to be more resilient than their counterparts.
It is interesting that in the first quarter of this year, in the investment world, ESG was the only sector that had positive inflows of money, all the rest had negative outflows.
Investing sustainably means putting our money to work on issues ranging from adapting to and mitigating climate change, improving working conditions and diversity, to tackling inequality.
More and more investors want to invest sustainably; they want to combine investing for a financial return with a positive contribution to the environment, society, or both.
What is exciting to me is that the investment arena is becoming part of the solution through the likes of Covid bonds, climate bonds etc.
ESG is also high on the agenda of infrastructure spend. Governments around the world are committing to infrastructure projects. With regards to the $2 trillion of stimulus in the US, and the €750 billion in the EU – the majority is to be spent on infrastructure.
This is typically what happens after periods of extreme economic stress. Governments embark upon infrastructure projects. Private companies (SMEs) who get the contracts are rewarded with long-term inflation linked agreements, giving them largely predictable cash-flow and earnings. Infrastructure projects create GDP, give people jobs, confidence and the government can collect more tax as a result. It incentivises private investment.
I see it as investing for a smarter future.
The genie is out of the bottle and there’s no putting it back. Change is happening at pace. We all need to be part of it. Let’s look at what’s happening:
- Renewable energy projects, especially wind and solar, in Europe they are kick-starting a clean hydrogen economy
- Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in cities and regions
- Investing in more and better connectivity, especially in the rapid deployment of 5G networks
- A stronger industrial and technological presence in strategic sectors, including artificial intelligence, cybersecurity, supercomputing and the cloud
- Building a real data economy as a motor for innovation and job creation
- Increased cyber resilience
- Vertical farming, lowering carbon footprint and taking food production to where populations are without pesticides and fertilisers.
Remember, change can be daunting, but managed properly, it can be the start of something truly amazing.
Let’s spread the word!
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.