Please find below our Investment Market Update as at 9th April 2020.
Blue Sky Investment Market Update
Opportunities abound for shares
Since what now looks like the bottom of the equity market collapse, as of the 20th March 2020, we have seen some significant gains in individual shares. Granted, many of these shares had their prices pummelled but, it does reinforce the opportunities that I have spoken about.
For example, a local company McCarthy & Stone, has seen their share price rise by more than 100% although their price of 86.9 is still some way off its 160 valuation in February of this year. Significant progress however, from its value of 40 on the 19th March.
Of course, buying shares is fraught with danger as it creates a concentration risk and, in these times, there is a real possibility that a company could go bust.
Blue Sky’s remit is not focused on individual shares but instead our expertise is focused on funds and managed portfolios. Simply, this means we don’t have a concentration risk in the same way as individual shares because money is spread across various asset classes. Hence why our assets under management didn’t fall in the same way as many share classes.
Performance of the Blue Sky Portfolios
From the 20th March 2020 through to the 8th April, the Blue Sky Portfolios have performed as follows. This is net of fund management and platform costs:
- LGTV Balanced = +6.25%
- LGTV Adventurous = +8.25%
- LGTV Sustainable Balanced = +6.74%
- LGTV Sustainable Growth = +7.75%
- Sapphire Balanced = +10.75%
- Sapphire Adventurous = +11.3%
- Momentum = +9.91%
- UK Infrastructure Portfolio = +20.24%
- Global Infrastructure portfolio = +16.76%
It’s worth noting that the LGTV portfolios didn’t fall as much as some of the other portfolios before the 20thMarch.
Encouraging indeed, and this means that all our portfolios are now showing just low single digit falls over the rolling year. I know I encourage clients not to look short-term but, boy have we had an avalanche of bad news and so I thought it was high time we had something to lift our spirits!
How are markets behaving at the moment?
Equity markets in general continue to push on upwards, all on hopes of a relaxation of the lockdown guidance within the next 3 months. Investors see this as an optimistic outcome compared to other scenarios.
In the US, there is even talk of another round of stimulus at the same time as a pending move towards reopening the economy. Yesterday the S&P 500 posted positive gains and is now 20% higher than its low on the 20th March which normally would signal a bull market.
However, in Asia overnight, stocks gave up much of their gains on news that there had been a rise in Coronavirus infections across Europe, coupled with a rising oil price. Most of the countries in Asia are net importers of oil. The oil price rose on the prospect of Russia and the Saudis agreeing to cut production. This may be bad news for certain indices but with a heavy weighting of oil stocks in the FTSE 100, this is good news for this particular index.
The outlook for investment markets
Well, put it this way, it looks a lot better than it did some 3 weeks ago when we went into lockdown! Of course, the outlook is uncertain and sadly there will be many business casualties along the way. We are seeing this at a local level too.
The key, as I have always stated, is the time period before companies can begin trading which will dictate the next phase of investment market performance. The movements to date are encouraging but there may be shocks around company data and earnings, but in many cases, this has been reflected in prices.
Blue Sky’s financial position
I thought I would just mention our position just in case clients have any concerns on the back of the negative news flow about companies in general.
We are all currently still working, albeit remotely and we have been busy dealing with existing ongoing client work. Clearly, we are not receiving the number of new enquiries we normally see and so we are now moving onto what I call our innovation phase. We are now looking forward to implementing many of the ideas we have been working on with a view to delivering even better services for our clients.
It’s also worth mentioning that financially, we are fortunate in that we have significant reserves behind us. We always try and retain 25% of our turnover in accessible assets. Being part of a highly regulated sector, reinforces the importance of holding liquid assets.
Stimulus for property prices in the UK?
It was reported on Bloomberg this morning that the Royal Institution for Chartered Surveyors have said that longer term pessimism in the property market indicates that measures such as a suspension of stamp duty could be needed. Good news if you were intending to buy a property. Imagine; a buyers’ market, no stamp duty and record low interest rates!
Easter wishes to you all
Normally I would say enjoy the break but for many, it is just another day. At least its glorious weather but whilst it may be tempting, we all know the advice. Stay at home. Stay safe.
I hope you have managed to pick up some chocolate on your ‘essential’ shopping trips. I know I will be indulging.
Happy Easter everyone.
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.