As we move through a very un-British Summer! I hope this letter finds you well and that you have managed to make the best of the weather.
If I had told you at the start of the year that we would get a war in the Middle East, an oil spike, a new Prime Minister, and a wobble in the great AI trade, and yet that many markets would be at or near record highs, you would have laughed me out of the room, however, on this occasion, most markets took it in their stride.
The Middle East war, sadly, is not quite finished with us. A peace deal in June reopened the Strait of Hormuz (which carries roughly a fifth of the world’s oil) and pulled prices sharply back from a peak near $120 a barrel, but July brought a flare-up: attacks on tankers, fresh strikes, and oil back up into the mid-$90s. An uneasy truce rather than a resolution, then, though still a long way below the worst of it.
The other story is tech catching its breath. Artificial intelligence stocks had an exceptional first half; one memory-chip maker rose more than eight-fold before handing half of it back, and July has seen investors take profits and rotate into safer corners such as healthcare and financials, which quietly hit record highs of their own.
SpaceX, the biggest stock market float in history at a jaw-dropping $1.77 trillion, has since halved. Not a crash, more the froth blowing off, and a timely reminder that a great company and a great investment are not always the same thing.
Closer to home, Andy Burnham is now our seventh Prime Minister in about a decade, and the rumour mill is already running ahead of his first Budget this autumn: talk of raising income tax thresholds, tinkering with pension tax breaks, and finding “flexibility” within the fiscal rules. This will have to be paid for from somewhere (more pain on inheritance tax perhaps).
Whilst the UK sits under something of a grey cloud, with growth forecasts trimmed to under 1% for this year, inflation is expected to nudge higher. The skies elsewhere are surprisingly bright. The IMF still expects the world economy to grow around 3% this year, judging that it has absorbed the war rather better than feared. American shares enjoyed their best first half in years, smaller US companies their best since 1991, and Asia’s technology exporters are booming. A well-diversified portfolio has had plenty of sunshine to find.
Having just returned from a tour of China, things are clearly much brighter there in every way than the West is reporting. Hotels, restaurants, and tourist sites are full of Chinese business people and Chinese and Asian tourists. Roads are full of smart new Chinese EVs with people clearly travelling to work, in modern factories and offices. New six-runway airports built in two years (no delays or flying around in circles waiting for a landing slot). Everything is clean, up to date, and works efficiently; they could honestly teach us a thing or two. How we invest in this profitably for you remains a quandary.
Our approach, as ever, does not change: good diversification, high-quality assets at sensible prices, and growth and income sought globally, built to deliver whatever the headlines throw at us.
Please may I remind you, nothing in this note represents personal financial advice and should you wish to take any action as a consequence of it, please talk to your authorised GT Wealth Management Financial Adviser first.