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Issue 31 - It’s All About the Data - Not the Dates!

It is remarkable to think that this time last year, we had heard about the first few cases of Corona virus in the UK, but little did we know what to expect! In fact, come next month, it’s been a full 12 months since I started writing News and Views and since that time, what a journey we’ve all had.

The feedback that I have been getting from people has been very encouraging and it’s pleasing to know that you enjoy reading my comments. If however, you would prefer not to receive them, do let me know and I can easily take you off the circulation list, because I know it can be frustrating if you’re getting correspondence that you would really rather not receive!

Some of the more recent feedback I have had was to comment that I have been saying a lot less recently about financial implications in favour of more general thoughts and largely, this has been because there’s been little new news to report on the financial scene. That having been said, as it has been a while since I have looked in any details, I will devote a bit more of this newsletter to the financial side of things.

Before doing so, I think I must make a comment about the sterling effort that the NHS are still managing to deliver in the UK and other front line staff and medical practitioners around the world as the roll out of the vaccination programme accelerates. The results being achieved in the UK are nothing short of phenomenal.

It must be disheartening when they hear in the news that the NHS is going to be under extreme pressure for another 6 weeks or so – they really do deserve some respite.

Of course, we are eagerly awaiting the announcements from Boris Johnson on Monday of next week, when he is set to lay out his roadmap for easing the restriction under lockdown, but as he has been encouraged by the professionals, it should be all about the data and not about the dates. It would seem that he has acknowledged this.

Whilst we accept that there are no guarantees, nobody wants to be bounced back into a further lockdown, and therefore, making careful plans for easing restrictions now will go a long way to ensuring this is indeed, the last Covid 19 lockdown – fingers crossed!

Certainly the most recent statistics are very encouraging and when you look at the graphs, these are showing a very good trend.

As you may recall, when we sent out our Christmas greetings in December, I said that we had chosen to do this by e-mail again this year and that we would be making charitable donations for an amount equivalent to what we would otherwise have spent on Christmas cards and postage. We did indeed make donations to both RNLI and the Kent Surrey Sussex Air Ambulance and I am attaching to this e-mail, copies of their letters of thanks that I thought you might be interested to see.

So let’s turn our focus now to the financial world and have a think about what’s been going on there!

The single largest factor that affects your investments is what’s going on in the financial markets and they in turn, do not like uncertainty. Winding the clock back 12 months, there were three main uncertainties that markets were trying to get to grips with, those being the Brexit negotiations, the upcoming US Presidential Election and the soon to become elephant in the room, the Covid 19 epidemic. It was the last of these that saw major markets globally drop dramatically in March last year by as much as 30% or more.

It’s fair to say that most of those uncertainties are now out of the way, with the finalisation of the Brexit transitional agreement and the US Presidential Election now being behind us, markets largely know what they are dealing with in both cases.

The Covid 19 impact is yet to be felt fully, but with the roll out of the vaccination programme, markets are already looking beyond the short term to where the economies may be going next. We even saw the Governor of the Bank of England last week, in an uncharacteristically bullish mood, stating that he felt that the recovery in the UK economy was likely to be significant after the end of the first quarter.

With such a large drop in March last year, and whilst all investments were impacted, why is it that our client’s investments did not drop to anywhere near the same degree and have largely managed to recover their values since?

The answer actually has a number of facets to it. The first of these is that when we look at Stock Market indices quoted in the Press or on the TV, they are typically talking about the larger Companies like the FTSE 100 Share Index looking at the 100 largest Companies in the UK, or perhaps the Dow Jones looking at the top 30 companies in industry in the US. It’s easy to be fooled or mislead by these headlines when in fact, your investments enjoy a much wider spread than simply the Companies reflected in the main indices.

Whilst Fund Managers cannot completely buck the trend of markets overall, it is their expertise in managing portfolios and spreading assets across many different asset classes that gives clients less of a roller coaster ride.

As global economies are beginning to recover, it is clear that we are going to see the evidence of winners and losers following all that has gone before. The obvious examples can be seen in the High Street with the likes of Debenhams and Top Shop disappearing and being snapped up by on-line retailers. It might be easy to say this is because of Covid, but in fact, the writing was already on the wall and the last 12 months has simply accelerated the process. The Companies that are innovative and adapt quickly to change will be those that survive and prosper, whereas those that choose not to, will go the same way as the dinosaurs!

Looking to the future, the general consensus is that we should see a return to sustained growth in markets as economies start to recover. Yes, unemployment is likely to increase, which will have a negative impact, but as some of the pent up savings that have accumulated over the last 12 months start to get spent, whether that’s in the High Street, on-line or on travel and leisure, this will all start to pump more money through the economy, which will help to drive the recovery. Job numbers will then start to increase again, and sentiments will become more optimistic.

Since the Summer of 2016, when the UK Referendum determined that the UK was to leave the European Union, UK Stocks have broadly been out of favour and indeed, we have seen the currency under pressure. Since the beginning of this year however, we have seen Sterling gain in strength against both the US Dollar and the Euro and my personal view is that this trend will continue. Furthermore, Fund Managers are looking forward to the opportunities that will unfold in the UK in particular in Equity markets, where they are expecting the UK to play some significant catch up.

Whilst there is never room for complacency, I sincerely believe that the worst of the recent tribulations are behind us financially and we should be able to look forward to a more positive picture unfolding over coming months and years.

I hope you will find these thoughts to be helpful and I would be pleased to hear from you if you have any specific questions you would like to raise.

Otherwise, it just remains for me to pass on our best wishes as always.

Richard, Chris and Lesley

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