Please find below our Investment Market Update as at 29th May 2020.
Blue Sky Investment Market Update
Sustainability is the name of the game
A reminder to join us for our webinar on Sustainability investing; as I’ve said many times, this is a sector that is going to go from strength to strength, attracting more interest and more money.
The EU looks likely to embrace strategies aimed at helping the environment. It is thought that there will be conditions to a €750 billion recovery plan designed to boost jobs and growth. Ursula von der Leyen, the President of the European Commission, said this week that “we can now lay a cornerstone for a union which is climate neutral, digital and more resilient than ever before”.
Our virtual seminar is next Wednesday, the 3rd of June, at 10.30am for our 30 minute webinar with Phoebe Stone who heads up the Sustainable Investment team at LGT Vestra.
If you would like to attend, or you wish to invite another member of your family or a friend, please click here to register and full details on how to join will be sent to you.
Opportunities are plentiful
Transitioning out of lockdown will create many opportunities but for some sectors and companies. However this is going to be a long slog, with casualties along the way. Now, more than for a long time, active management with an emphasis on those well capitalised companies will bear fruit.
There are already marked differences in the way that certain sectors have recovered, with those most notable being technology, health, infrastructure and sustainable investments. As Fidelity International stated in their investment bulletin this week, what is important from hereon in is that smart investors will allocate capital to areas that are likely to recover quickly, as well as identifying key themes that will shape returns over a longer-term horizon.
The global recovery will have a number of economic phases. Firstly, a focus on solving systemic issues whilst also seeking to stabilise the spread of cases within each country. This is where we are now and on the cusp of the next phase. We are now setting about trying to rebuild the real economy, albeit with some changes as to how we operated post-lockdown. With all the stimulus and financial support, we should then expect economic expansion… oh, and some higher taxes as we’ll have to pay for all the stimulus somehow!
We agree with Fidelity, in that there will be wide dispersions in outcomes for regions, sectors and individual companies. To our mind, just investing in a sector like the FTSE 100 is folly. It might be a cheap way of investing but within this index there are sectors we will want to avoid. Selectivity will be the key and understanding what is under the bonnet is so important. For example, the FTSE 100, on a price only basis, without dividends reinvested, has actually lost money over 5 years, at -11.68%.
Research capability is one of the reasons why we teamed up with LGT Vestra, Foresight and L&G Investment Management. This research really comes into its own at moments of uncertainty and understanding the real detail is essential. Identifying appropriate sectors, across varying regions with an insight into how individual companies are positioned, is not for those investors with a little bit of knowledge. If you know people whose pensions are languishing and who don’t have a proper strategy, now is the time to warn them to take action; with markets rising they may be a little more complacent than they were a few weeks ago.
Enlightened by lockdown
This week we have had been inundated with enquiries, three of which concerned potential clients who have decided, if at all possible, that they don’t want to go back to work and would like to transition into retirement. This is not a surprise to us; we had a discussion amongst the team about a month ago saying we expected to have lots of new enquiries from people with a desire to live their lives differently. Having a dynamic financial planning strategy allows everyone to explore possibilities. I’m pleased to say, it looks like we can help them all leave work in the next 3 months!
Whilst lockdown has been a period of reflection for most of us, not everyone wants to retire. We have had one client who was due to retire soon, now saying they are not ready. Their exact quote was “I’ve been given too many jobs to do during lockdown!”
Have you heard this on the news?
Sorry, I can’t help myself!
Since the 23rd March 2020, the FTSE 100 has risen in price by + 24.5%… have you heard that reported?
Granted, the FTSE 100 index fell like a stone recently and although it has partially recovered, it is still posting a loss of -16.15% over the last 6 months. Technology stocks over the same period have risen by +26% (up to and including the 28th May) and healthcare stocks by +23%. Of course, traditionally such assets have been deemed as high risk and they fell dramatically during the early stages of lockdown but, unlike most sectors, they have seen a V-shaped recovery.
Most other sectors are recovering in the ‘tick-shape’ we have talked about, although some are more akin to resembling the tail of a kite being buffeted in the wind. Some emerging markets come to mind!
Do you remember the Goldman Sachs warning a couple of weeks ago, when it was reported that equity markets could fall as much as 20% and my retort was… but they might not! It is a bit like the scientists talking about the Covid-19 models and the extremes of possibilities. Of course, this is what grabs the headlines. Incidentally, since I mentioned Goldman Sachs, the S&P 500 (US) has risen by + 5.56% and the FTSE 100 by + 4.7% since the 12th May.
Have a great uplifting and sunny weekend. Keep positive and safe.
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.