Please find below our Investment Market Update as at 31st March 2020
Blue Sky Investment Market Update
Not much has changed… for a change!
Whilst central banks and Governments around the world have injected all manner of stimulus into the system, sadly, in the western world, the health situation continues to deteriorate.
There is much speculation about the extent to which people will contract the virus and accordingly, the number of deaths, with models predicting a wide range of scenarios. Let’s hope the Imperial College update at the weekend, from Professor Ferguson, proves to be somewhere in the ball park when it predicts only 5,700 deaths, as opposed to their original estimates of 260,000. The change in numbers is due to a change in strategy by the Government, with the original figures relating to the U.K. maintaining its previous policy, of less restrictive interventions.
Predicting is a difficult task and is, of course, dependent upon a number of factors. The same goes for what may happen to our money in the short-term. Like Professor Ferguson, JPMorgan strategists were relatively upbeat on Friday when they stated “most risk assets, including stocks and corporate credit, are likely to be at their lows for this recession. Criteria including massive fiscal stimulus, recession-level pricing and a reversal in asset allocation have been met, justifying adding risk selectively over the coming weeks”.
On a technical basis, most indicators for equities at the beginning of last week, suggested a screaming “buy”, but after the rally, clearly stocks aren’t as cheap as they were. Since last Friday however, equity markets have been fairly sanguine and not much has changed. A surprise to us, as we feared that traders may sell after the near-term spike in equity prices. Potentially, this is good news and may well support JPMorgan’s view.
However, as with the Coronavirus estimates, they may be wrong. It is possible that expectations may change and if there are unexpected corporate shocks out there, such as earnings being worse than predicted, then we might see equity markets regress.
However, we are pleased that not much has changed… for a change!
Updates with investment partners
As I finish off this script, I’ve had three conference calls today with Foresight, LGT Vestra and 7IM and will shortly speak to Legal & General Investment Management.
Whilst I stated above that not much has changed from a wider macro perspective, on a micro perspective, it is interesting to hear how fund managers are adjusting their strategies and taking advantage of certain opportunities. In fact, one fund manager, on a purely professional basis, said opportunities like this don’t come around very often. He informed LGT Vestra that this is one of the three best opportunities he has seen in 20 odd years.
Our investment partners are generally neutral on equities in the short-term but accept that buying at these levels is attractive, albeit in tranches. Where they are seeing real value is in the credit space and as we speak, they are rotating parts of our portfolios into this area.
It was also interesting to hear from Phoebe Stone at LGT Vestra, who spoke about the markets in context of sustainable investments. She spoke about how financial markets need to be part of the solution in the crisis we find ourselves in. An exciting development being a ‘Covid Bond’, whereby investors have a clearly defined pathway of how the proceeds will be used. The African Development Bank and Nordic Bank being a case in point. Interesting stuff.
Thank you for reading my latest interim update. I must warn you that I am writing a blog that will be published tomorrow – but it’s a refreshing distraction from the markets! However, back to business on Friday, when I will update you with a summary of the market insights I heard today from our investment partners.
As always, keep safe.
Gary and 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.