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As 2024 unfolds, I reflect on where we are and based on the presumption history always repeats itself, I ask after recent events, are we looking into a period like the 1920’s, 1970’s, or a repeat of the last few years? As each of these may require a somewhat different approach to  your portfolio going forward.

The PE (the number of years earnings it takes to get your money back) of the now called super seven, the top tech stocks in America, is now over 50! They are responsible for a large element of the increasing share valuation of growth portfolios. Whilst most of their businesses continue to perform strongly. This could represent a repeat of the 1920’s, when it took a very long time after the events of 1929 for investors, who were over exposed to the equivalent assets at that time, to recover.

The possibility that growth may disappear with inflation remaining elevated and ongoing energy issues, commonly known as stagflation, looks like the 1970’s.

The view that interest rates will fall steadily this year alongside falling inflation with growth being sustained  would be the perfect outcome .  At the moment encouragingly America is successfully on this path. The rest of the world less so.

Whichever it is, higher inflation is historically associated with more short-term volatility in markets, which is something we will have to get used to, and relearn to live with.

Unfortunately, history tells us Governments tend to get this wrong, often due to other influences, such as Elections (the need to create a feel-good factor) which are fast approaching in the US, here in the UK, and in many other parts of the world.

In the meantime, the higher interest rate environment (more normal) enables us to invest for a better income, at lower risk, for funds we manage with an income objective.  It has also created the opportunity in higher risk funds, to invest in some quality assets at very attractive prices, which have fallen out of fashion/favour over the last two years, going against the herd, and taking a longer-term view.

Debt levels across the Economy, Government, Corporate and Individual are at very high levels, with interest rates much higher and the availability of credit starting decline, taking this into account in drawing up portfolios is a very important factor.

Geopolitical risk, meanwhile, remains a serious concern from an Economic perspective, whilst not taking lightly the humanitarian one.

Taking all this into account, it is likely more changes to portfolios will be the norm for the immediate future , with a view to capturing the best opportunities that arise from all of this.

The final conclusion we come to will really be no surprise to those of you who know us well is that whichever of those scenarios is the outcome, the key to protecting and hopefully growing your wealth, is that which has always held true, and that is to take a longer-term view. Own the highest quality assets we can for you, whether it is in Government debt or Equities, and be prepared to change strategy as things emerge.

As we sit indoors with rain and overcast skies whilst watching stories of holiday-makers suffering wildfires and 45-degree heat in Europe! the world seems full of contradictions.

Markets similarly are performing in unexpected ways with tech taking off at a tear this year whilst some safer assets, after a short resurgence, are again lagging.

The key issues we see to pay attention to are demographics and changing climate over the long-term, inflation, interest rates and political fractiousness over the short to medium-term.

The fastest ever rise in interest rates has, so far, had a mixed effect on its target inflation. This is perhaps because savings outnumber borrowings by £4 to £1, and so rising interest rates, some would argue, is mildly inflationary.

The biggest concern seems to be that having left things too long, Governments will now go too far, for one of the challenges is that very few of the decision makers have worked in inflationary times. This week, we had a visit from a major financial institution proudly pointing out that two of their Managers had just passed their twenty-year point managing money for the firm. My thought process was, so they have no experience of management in inflationary periods!

The splintering of the world, economically, is undoubtedly going to change opportunities & threats to both Economies & Countries, and of course, therefore, markets. Whilst it has been very profitable and is common to hear the phrase “never bet against America” and all we hear about China in the Western media is that “led by a faltering property market, it is in the doldrums”, however, the fastest growing world trade is between China, Africa, South America and the Middle & Far East. In the last year, numbers such as an increase in exports from China & some of these places between of 25 & 50% is not uncommon, with up to half of this being goods that can be used by those countries to make things themselves, so we need to be mindful of a changing world.

Meanwhile, the US clearly remains a world leader in Tech & Artificial Intelligence (AI), which everyone is now talking about. History tells us the early pioneers “lose everything”, and after a couple of years, people go what “was that all about” and then ten years later it has changed the world. So, at this time, we should be making our haste slowly, to quote my father!!!

Businesses, who are after twenty years of abundant & ever cheaper money are over levered, will clearly struggle.

Ultimately, quality Companies will always win out and, with interest rates having risen, investing in these and quality Bonds (Loan stock) using Exchange Traded Funds (ETFs) to keep costs low & diversification high, we believe remains the best approach.

In the meantime, let us hope some of that warmth, but not much, comes here for the second part of the Summer and markets give us the same.

As we move into the year markets have got off to a strong start, however, for the next six months at least, I believe they will continue to be volatile. Inflation, Energy issues, the War in Ukraine, Global food challenges, and Covid, are all still very much with us and investment markets always hate uncertainty.

China’s recent decision to abandon its zero Covid policy very abruptly, whilst hopefully rebooting its Economy this year is currently causing some further disruption in supply through absenteeism in factories, due to the virus.

There are mixed views on the extent Economies & Individuals are going to be challenged by the rising interest rates necessary to combat inflation. To date, they appear reasonably robust, demand is steady and, despite the tech industry layoffs, there are still a lot of unfilled job vacancies across Western Economies. However, during the year, the ongoing and largest rises in interest rates in a decade will undoubtedly have an impact.

The switch to renewable energy is primarily challenged by the very long time it takes to gain permission for new projects and the high demand for certain raw materials it creates. The traditional energy industry remains caught in the crossfire between ‘those who see it as critical to increase supply in the short-term, at least’ and ‘those who are adamant that we cannot afford to on climate grounds’. The mild winter and heroic efforts to replace Russian supply in Europe has worked in the short-term. However, it will remain a major challenge for Europe to obtain affordable energy, for its industrial base for the foreseeable future.

We are seeing growing pressure to increase taxation to cover Government deficits, social expenditure and to reduce inequality, particularly in the UK. As I write this, the largest strikes in a generation are taking place. Consequently, reviewing our clients tax positions (income & inheritance) remains high on our agenda, in particular for those for whom minimising taxation is important when passing on assets.

The blockchain & cryptocurrency market continues to be in complete turmoil. It is estimated that 1 in 10 people in the UK put some funds into this arena. It remains an area we have NOT participated in for clients, apart from a very small exposure to blockchain technology in our global portfolio. Our view remains that the technology is interesting and may have real value, (one of Switzerland’s largest financial institutions is now using the blockchain to settle market trades more quickly and at lower cost), but the risk to individuals of engaging in this largely unregulated industry leave it uninvestable for all but those who are looking for an outright gamble.

We now believe that there are grounds for optimism in markets, as the consequences of these issues become clearer.

Our approach to this is to continue to take a long-term view, be clear about what is short-term noise and what really matters in respect of your portfolio. The key as we see it is to continue look for the highest quality investments we can find, seek to control the cost of portfolios using Exchange Traded Funds (ETFs), and avoid trading unnecessarily.

As we move into the second half of the year after a tough first, markets are showing some signs of life, however, they continue to be challenged after their post-covid recovery. Inflation, Energy shortages, the War in Ukraine, the threats from China over Taiwan, the increasing risk of global food shortages from the War and the exceptionally warm and dry summer, covid, transport issues, raw material shortages, (it’s a long list!) have all had a major impact on the world and investment markets, which always hate uncertainty.

Covid is still with us, the biggest challenge with it now being the continuation of the Chinese zero covid policy, and accompanying lockdowns. The good news is that as global vaccination takes hold, things do appear to be improving, in terms of mortality.

As Economies switched back-on the combination of loose monetary policy by global Governments, which resulted in excess savings over the lockdown periods and high demand, resulted in global demand and supply shocks which, in turn, has contributed to the largest increases in pricing for the last twenty five years. This is starting to ease which hopefully will help with inflation in the near future.

At the same time, the switch to renewable energy has resulted in a situation where for some years now there has been little investment in western countries developing new fossil fuel sources, due to the social and political pressures building against them. At the same time, the renewable industry is yet to fully find its feet in producing a reliable alternative source of energy, as needed by the modern world. This, along with the challenges with Russia, is causing a global energy supply crunch which has led to the recent increase in global energy prices.

The rise of Environmental, Social and Corporate Governance (ESG) has been a factor in this, as people seek to move in this direction with their lives. ESG portfolios, after a strong two years, had a tough first half but have evened out more in line with markets lately.

Globally, we are also seeing 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 blockchain and cryptocurrency market has had a massive devaluation lately. It is estimated 1 in 10 people in the UK have put some funds into this arena. It is not an area we have participated in for clients, apart from a very small exposure to blockchain technology in our higher risk global portfolio. Our view remains that the technology is interesting and may have real value, (one of Switzerland’s largest financial institutions is now using the blockchain to settle market trades more quickly and at lower cost), 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 whilst as I said at the outset markets are starting to improve (they always look forward), we  see volatility in investment across the board as the logical outcome for the immediate future.

One piece of good news is that dividends have continued their very strong recovery. Those assets that rose the most as part of the initial recovery (largely highly growth orientated companies), are those that have taken the most pain, whilst those in more traditional industries are more stable.

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.

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.

As we enter the last quarter of the year much has happened this year in the UK and globally to challenge markets after their strong post-crisis recovery.

Covid, transport issues, raw material and energy shortages, inflation, budgetary 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 the death rates are starting to come down from the horror of the last year. Hopefully, as global vaccination takes hold, things will continue to improve and we will not have the setback of a new more virulent variant this winter.

As Economies switch back-on the combination of loose monetary policy by global Governments, which resulted in huge 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 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 has caused 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 in this market place has started to wash out as the reality of some of its weaknesses as noted above have started to take hold.

The third major issue we see building is 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 fourth is the rise of the blockchain and cryptocurrency about which views vary from this 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 investments. 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.

As we move into the second half of the year we do so with some excitement for the ability to enjoy a hot summer, as the Government looks to lift the majority of remaining restrictions on July 19^th.

In terms of vaccinations, 45 million people/ 86% of the UK population have received their first dose and 34 million people are fully vaccinated, having received their second. This uptake in the vaccine provides strong grounds for businesses to reopen and become less dependent on the support the Government has provided, which will give businesses more room to deal with the complications of the Brexit trade deal, which are still ongoing.

After a strong recent run, we expect stock market volatility to remain with us as economies around the world start to reopen with restrictions lifted but with that the expectation of inflation rearing its head, after being dormant for many years. Central Banks around the world are of the view that the inflation we are seeing is “transitory” and it will continue to remain subdued after this year, as the world economy finds its feet again. We currently share this view but, will keep a close eye on it, for signs it is becoming more entrenched.

Our own portfolios have given a strong relative performance over the last six months having been a little slow to take off into the initial recovery last year, which has vindicated our long-term level headed approach and, in not always following the herd.

We continue to take a global and long-term view for your portfolios and remain diligent in our research to ensure that where you are invested continues to be in companies with sound business models, good financials and accountability in terms of environmental, social & governance track records with the strategies to improve them.

We start the New Year with both optimism and trepidation. Optimism that eventually the vaccines will allow a return to normality, sooner rather than later, and that the Brexit deal will settle down into a viable one for Business. Trepidation that further complications may arise with COVID-19 and that firms will run out of money before they can reopen or that new ways of working under the Brexit trade deal damage their business.

The implications of this, I believe, are that we will continue to see some market volatility over the course of 2021, hopefully, settling down after that. Income for the foreseeable future remains a challenge, although, we are encouraged by the rate at which some companies are reinstating their dividends.

In portfolio terms, we were right not to run from the UK Stock market during the summer as it had one of the strongest recovery’s globally at the end of the year. Looking forward, however, it is clear that a more global investment approach has really ‘come of age’ over the last year.

We are starting to see a real and consistent outperformance by companies with good (ESG) environmental, social & governance track records, so this will feature across our advice going forward.

We will continue to take a long-term view on portfolios and, considering the above sentiment, focus on companies with good financials and a sound business model for the world we find ourselves in. At the same time, being cautious of those opportunities that are too good to be true, of which there are always many.

As I write this quarterly update, it seems the Economy and markets have much in common with the weather – the rain is coming down now and then the forecast is for a mini heatwave next weekend!

So far this year, we have seen violent swings in markets from all-time highs during February in America to the fastest ever falls in March, and then back to highs in some places in July.

Our view is that this is what we will continue to see for at least the rest of the year. The pandemic has created havoc in Economies globally, with some industries absolutely devastated, and others prospering.

The key issue for investment we see is that it has accelerated the rate of change, particularly, in the use of technology. In recent years, we have been cautiously expanding your exposure to this arena and, as things change, it will be right to increase this further as long as we can invest at a sensible price.

The other key issue of this year has been the rate at which companies have cancelled, reduced or deferred dividends. This is most critical for those of you who rely upon the income from your portfolios, and our approach to this is twofold, firstly we are increasing your global exposure so that we can diversify your sources of income within the portfolio, and secondly, where necessary we will discuss with you individually as to the implications of this on your own portfolio and what action to take.

As I am writing this my partner has just driven off with our two youngest on their way back to school. Hopefully this is a good sign of the beginning of the end of the worst of this crisis.

Companies have behaved very differently at this time to any other period in my career by way of cutting / suspending dividends faster and more brutally than before in  previous Economic crisis. This is a reflection of two very different issues, in some cases this is strong companies just adopting a prudent approach to ensure they remain in a good position for the future, whereas in others, there are real economic difficulties arising.

The consequence of this is that if you are not spending the income you draw from your portfolio your consultant will have discussed with you the possibility of reducing the income you take, which will be helpful in allowing your capital to recover.

In building your portfolios, we always aim to buy the strongest companies we can and so hopefully as time moves on we will see this come through in the performance of them.

Markets have staged a strong recovery in some areas and less so in others. I think it is far too early to make any calls on this as I believe we will continue to see volatility until at least the end of this year as there are still so many unknowns.

As always, we continue to take the long term view, however, something that I have been talking about for some time now has clearly been very relevant in I this crisis is the difference between old and new Economy businesses, simply put, the difference between BMW and Tesla. I genuinely believe this crisis has escalated the rate of change and this will need to be reflected in your portfolio going forward.