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Investment Thoughts

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.

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Investment Thoughts

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 19th.

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.

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Investment Thoughts

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.

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Investment Thoughts

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.

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Investment Thoughts

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.

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Investment Thoughts

The last two months have been a sanguine reminder of the difference between risk and loss. At the moment, we are all experiencing risk in our portfolios with values fluctuating. Unless we sell out, this is not yet a loss and with a very diverse portfolio of the type we build at GT those businesses within your portfolio that will inevitably fail will represent a very small percentage of the total, whilst in due course the majority will recover.

The key for all of us, therefore, will be to be careful about what we withdraw at this time by way of capital or income. There have been some very substantial dividend (income) suspensions/cuts by companies, particularly in the UK. Globally, this has been less of an issue which will help to maintain income.

This is the first time we have seen such quick and substantial action taken on dividends certainly in my career. There are generally two reasons for these cuts one, is basically a company taking a prudent view to conserve cash and the other represents serious trading problems in the business. With our emphasis on quality companies in your portfolio, we expect it to be the former, in most cases.

Therefore, we are closely looking at income levels for all clients and your consultant will discuss this with you in more detail at your next review. If you do not need the income at this time, it is clearly prudent to reduce or suspend it, to allow your portfolio the best and quickest chance of recovery as economies re-open.

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GT Website Launch

Firstly, I would like to start by welcoming you to the new GT wealth website part of our 2020 initiative to offer an online way of dealing with us for those who would like to work more in this way and to improve our regular communication with you.

I would, however, start by saying that we have every intention of maintaining our personal relationship approach alongside this. It is something that came up very strongly in response to the recent survey we asked you to complete. On that subject, I am humbled by your incredibly positive comments about the way we seek to work with you. Thank -you.

By way of an update on the office, we closed it in March in line with Government guidance, having set everyone up to work from home which, whilst as strange as this has been for all of us in some ways , has actually has worked very well, due I am sure, to the diligence of our team.

We are now planning a phased-reopening from June and so will be offering both on-line/by phone and face to face annual reviews from there on, in, line with your wishes. Your consultant will discuss and agree with you the way forward. I very much look forward to starting to see you in person soon, even if we may not be able to shake hands!

I look forward to the future with confidence and wish you all well, stay safe.