Investment Thoughts

It has been good to see some of you in person again recently, which I hope will continue over the course of this year. As  the year unfolds, much happened during the latter part of 2021 in the UK and globally to challenge markets, after their strong post-crisis recovery.

Inflation, Covid, transport issues, raw material and energy shortages, budgetary and taxation issues, new technology and political turbulence are all having a major impact on the world and subsequently markets.

Covid is still very much with us, albeit, that globally hospitalization and death rates are coming down.  Hopefully, as global vaccination takes hold, things will continue to improve.

As Economies switch back-on the combination of loose monetary policy by global Governments, which resulted in excess savings over the last year and high demand, has resulted in global supply shocks which, in turn, has caused the largest increases in inflation for the last twenty five years.

At the same time, the switch to renewable energy has resulted in a situation where for some years now there has been no investment in developing new fossil fuel sources, due to the social and political pressures building against it. At the same time, the renewable industry is yet to find its feet in producing a fully reliable source of energy, as needed by the modern world. This is causing a global energy supply crunch.

The rise of Environmental, Social and Corporate Governance (ESG) is behind much of this, as everyone seeks to burnish their credentials, however, some of the excess market pricing of companies in this market place has started to wash out as challenges with the supply chain and increases in the price of raw materials have hit hard.

We are also see growing pressure to increase taxation on the wealthy to reduce inequality and fund some of the costs arising from all of this. As a consequence, reviewing our clients Inheritance Tax positions is high on our agenda for those for whom minimising taxation is important when passing on assets.

The rise of the blockchain and cryptocurrency about which views vary from this is the fourth industrial revolution, which will transform the world to it being the biggest fraud of the last 100 years, inflicted upon those for whom greed overtakes sense. Our view is that the technology is interesting, and may well have real value, but the coins themselves are not something a sensible balanced risk-taking investor would invest in.

We believe all of this will take some time to resolve and after strongly rising markets, we can see volatility in investment across the board, as the logical outcome for the immediate future.

Those assets which rose the most into the recovery are now those taking the most pain whilst more traditional ones are more stable into this uncertainty.

Our approach to this is, as always, to take a long-term view, be clear about what is short-term noise and what will really matter in respect of your portfolio. We will continue to control costs by using Exchange Traded Funds (ETFs) where we can, avoid trading unnecessarily, as well as maintaining a focus on quality.