Investment Update May 2020

Slow recovery, with investment values higher by the year-end.

The UK stock market

As of Tuesday 19th May, the UK stock market has remained just above 6000 points. This is just over 1000 points above the bottom of the market 4493.90 and represents a recovery of 20% so far.

Prospects for the UK

The UK’s entrepreneurs, with a few miserable exceptions (Ms Beckham comes to mind), are energised to do better and will emerge from the lockdown leaner than when they went into this crisis.

Many business people are finding ways to work with new ideas and services to sell. The shape of the economy will change but the desire to pursue free enterprise will not be diminished.

Ingenuity trumps pessimism
There is no doubt that innovating has resulted in brilliant examples of things being done in weeks that would normally have taken years. Where this is a will, we have found a way.

The future is bright once this crisis has passed.
Johnson has made it abundantly clear that he will continue with his election promise of “levelling up” the economy. The North of England will get the investment it seeks.

No austerity measures
He has also made it clear that he will not apply austerity measures. No return to the years of miserabilism, in particular under May and Hammond. No, we expect just the opposite and will see a determination to keep taxes low, create tax-free enterprise zones and encourage free-spirited entrepreneurship throughout the country.

But will this improve our savings and investments?
Yes, but not overnight. We do not see the stock market fully recovering, probably, for a year, but in the meantime, careful investment selections can outpace the pace of the general recovery and we are researching these for you.

And abroad?

Europe

Apologies for repeating this but Europe is in a mess.

Did you spot that the German courts have ruled that the European Court of Justice (The ECJ) does not have ascendancy over German law?

This arose as a result of the EU’s determination to issue Euro wide bonds to bail out the Southern states of the EU. This imposition has been rejected by the German Courts sparking concerns that the financial unity needed in Europe (which simply interpreted means the Northern nations paying for the Eastern and Southern one’s debts) is under severe strain.

Europe’s economic prospects?
Poor, time to avoid investing in European funds.

USA

Trump wants to be re-elected and will do whatever it takes.

The US Stock market has to go up if he is to be re-elected so expect all stops to be pulled out to ensure he is. We back the US Stock market to rise.

Technology

Jeff Bezos is now the world’s richest man. What does he own? Amazon… the share price has risen from $427 five years ago to $2,431 today, a 5.6 fold increase in value.

Whilst footfall dependent stores across the world are suffering, JC Penny, THE store in the USA at one time, has seen its share price fall 40 fold over the last five years. Debenhams and House of Fraser in the UK have the same problem.

However, the rise and rise of online shopping is making it easy for us to order online and await delivery so owning shares in technology-enabled companies is a “must” investment.

Biotechnology

The rapid response to the global pandemic of Covid-19 has proven that when needs must, we can, and do, find a way.

We expect the Biotechnology and Pharmaceutical sector to thrive. Over the past 10 years, they have underperformed other sectors, but this crisis is going to result in two realisations.

  1. When we need to get things done in a hurry, we can and do solve problems particularly those that threaten our lives.
  2. Global travel prompts the need for a global response to a virus that knows no borders.

The higher state of preparedness can only mean that more will be invested in monitoring our movements and our health and the Biotech/Pharmaceutical and Technology sectors will benefit from this.

China, India, Emerging Markets

All of the countries in the Far East look vulnerable to the vagaries of the Chinese economy. Forgetting any “trumped” up charges there is no doubt that China is a regime with few admirers and too much money. Not to be trusted, there is too much invested, literally, in giving China the benefit of the doubt. China cannot be trusted.

Japan

Is in recession and still not pulling its weight.

Should the UK seek an extension to the date we are leaving the EU?

Absolutely not. The new EU budget being drawn up now will call for even more money from every country that is a net contributor to the EU and we have been the second-largest such contributor.

To be forced to pay for the EU’s failure to regulate immigration, solve youth unemployment in the Southern states of the EU and its inability to adhere to its own fiscal rules would be a crime.

So we may well leave without a deal as the EU want their fishing rights to continue in full and for us to be bound by the EU’s trading standards even after we have left just to get a negotiated settlement.
Forget it!

So in conclusion

It is not all doom. We will get through this crisis and we will thrive as an independent nation.

Have a great weekend.

PS. And on a lighter note, online church services have rekindled the flame for at least one vicar who set fire to himself during an online sermon uttering the patriotically understated response “oh dear, I seem to have set fire to myself”. The vicar survived, but his jumper did not!