Please find below our “Weekly Market Update” as at 28th February 2020
Blue Sky Comment
ONE GAME IN TOWN
There is only one game in town at the moment and that is the Coronavirus. The virus has spread to Europe and the United States and we now find ourselves in the position, for the first time, of having more diagnosed cases outside, than inside China.
This has brought to the fore, concerns about the longer-term economic impact and the sell off has been pretty brutal.
The virus is clearly very contagious, yet, the World Health Organisation (WHO) says 80% of people experience only mild symptoms and recover quickly. The implications for supply chains however are serious as ‘lock-downs and isolation’ become more prevalent and there are fears that this could tip the global economy into recession.
As serious as the implications are, this impact will likely be short lived. Some stocks, such as airline stocks, have been given a real kicking over the last week and there is no doubt that there will be some corporate casualties if the impact of the virus is prolonged.
The S&P 500 had its quickest ever correction in history and the biggest fall since the financial crisis in 2008.
As always though, a sense of perspective is required. As serious as the implications are, this impact will likely be short lived
The virus will eventually be consigned to history and no doubt, by the end of the year, we will be likely be thinking ahead to other issues across the world.
We expect a significant bounce in the value of stocks as this virus is arrested and we begin to hear that the number of new cases is on the decline. We also anticipate that Governments and central banks will deliver stimulus and support for businesses and economies. In other words, we see serious buying opportunities ahead.
If you are interested in taking advantage of buying opportunities then please get in touch, especially if you have money languishing in cash. We don’t know when the bottom will be, but be in no doubt, this is a significant correction which in our minds, creates significant investment opportunities for the right people.
In the context of our own portfolios, the Sapphire and infrastructure arrangements have held up relatively well during the last week but naturally, there has still been erosion of capital. Over the rolling year, the Sapphire Balanced portfolio has delivered + 7.45%, net of fund and platform fees, which is still desirable.
The LGTV portfolios ( Balanced @ + 6.17% on the same basis) have fallen further because they don’t hold the same proportion of infrastructure that we have across the Sapphire portfolios, however the Sustainable portfolios still look good, with an annual rolling return of 9.57%.
The Momentum portfolio has experienced the biggest hit but as of Friday the 28th, it has still delivered + 16.79% for the rolling year, on the same basis. This compares favourably with the price of the FTSE 100 @ – 7.1% as I write, although there is typically a 1/2 day delay in prices feeding through into the portfolios.
It’s also worth remembering that a balanced portfolio also holds a significant amount of bonds. Whilst we are not a particular lover of bonds for a number of reasons, in this environment they come into their own, as they temper the negative impact in the equity space. Diversification as we always say, is key.
Don’t worry, we’re on the case. We know it’s painful at the moment but stick in there and remember there are tremendous opportunities to be had.
Have a good weekend
The Blue Sky 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. All performance figures were sourced from Financial Express Analytics on 28th February 2020.