Please find below our Investment Market Update as at 30th October 2020.
Blue Sky Investment Market Update
Market volatility has swept in like the weather
We thought the markets would be choppy and, of course, in the midst of autumn, so is the weather. Both to be expected, especially in the markets with the US Presidential elections around the corner, Brexit looming and the virus causing further chaos.
An insight into how Covid may unfold
More about the markets later. I thought I would first articulate some of the content of a really interesting webinar yesterday with a lady, well a Baroness actually, called Ruby McGregor-Smith.
I was invited to listen to her in my capacity as a Business Partner for the Dorset Chamber of Commerce. Ruby is the President of the British Chamber of Commerce. As President, Baroness McGregor-Smith works alongside BCC Chair Sarah Howard MBE and Director General Adam Marshall – and represents the interests of Chamber business communities and trade through a crucial period for the UK.
Baroness McGregor-Smith was Chief Executive of MITIE Group plc between 2007 and 2016, and was Chair of the Women’s Business Council from 2012 to 2016. She authored an independent review on race in the workplace for the UK government in 2017 and is a passionate advocate for diversity as a key driver of business performance. She was the first Asian female chief executive of a FTSE 250 company. The Baroness is a life peer of the House of Lords having been nominated as Conservative Peer in August 2015.
She gave a very engaging talk on the current dilemmas facing the government and how we are going to have to learn to live with the virus for quite a while longer.
The Baroness spoke about the government having a series of policies but how they have not given enough thought about how we exit from this crisis, suggesting that we are going to have to live with this for the next couple of years or so.
A vaccine normally takes 10 years to be authorised but there is no doubt, the activity to find a vaccine has been feverish, accelerating normal protocols. However, in previous situations when vaccines have been made available, it is clear that a large proportion of the population don’t engage.
The Baroness commented that the testing regime is much improved, sadly a little late, certainly when you consider that testing at Heathrow was requested some 6 months ago! Charles De Gaulle airport has now overtaken Heathrow as the busiest airport in the EU.
She spoke about how next year, devices similar the breathalysers may well be available. If China can test 9 million people over a 5 day period, so can we!
It was felt that industries like the airlines have been so devastated that if this goes until next Spring/Summer it could take up to 10 years for them to recover.
Further comment was made about infrastructure projects. She is a great believer in infrastructure projects and believes HS2 should have been started much earlier; Infrastructure spend paves the way for growth! The fear is that the UK government may not be able to fund projects to the extent that they intended, because of the damage to the public purse.
In a final positive flourish, she said she believes the government needs to decrease taxes to stimulate the economy, not bring in big tax hikes. Austerity is not the way, although she does feel that there are opportunities in the public sector to innovate and drive efficiencies.
Very interesting, and impressive.
I was put on the spot!
On the webinar, the Chief Executive of the Dorset Chamber asked me how all this uncertainty around Covid had affected us and our clients at Blue Sky. I articulated the importance of being nimble and flexible around what type of assets to invest in. It’s no good sitting in the old tired type of assets, it’s important to be proactive and invest where governments, central banks and companies are committing money.
So, what going on?
Well, the markets don’t like uncertainty and at the moment it’s almost a perfect storm with the resurgence of Covid, the US Presidential elections and Brexit.
Many equity markets have had their worst week since March. There is certainly some profit taking and repositioning. Despite strong earnings from the tech giants.
It’s worth remembering what Sanjay said at LGT Vestra only last week. Some equity indices may swing by up to 20% over the course of the next few weeks but it’s important to look beyond the short term and focus on the fundamentals. The US has some really good companies.
It’s also interesting to observe that bonds haven’t rallied strongly which suggests that traders are taking short-term profit and, depending on what happens around the US election, the equity market may rebound quickly.
Have a lovely weekend and stay safe.
Gary and the Investment Team
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.