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May Market Commentary

Archive for the ‘Investments’ Category

May Market Commentary

Wednesday, May 5th, 2021


Some of the numbers in this month’s Bulletin are simply staggering. Whether it’s Amazon’s profits or the ‘investment’ (which could alternatively be considered ‘spending’, depending on your political viewpoint) announced by President Biden. 

There was a time where the ‘standard unit’ of currency we talked about was a million. Company profits and valuations were measured in millions: debt was in millions. If the pandemic has done one thing, it is to change our default unit of currency. Now we deal in billions – borrowing to deal with the pandemic is in billions, company profits – at least if you’re Amazon – are in billions and no self-respecting start-up seems to go anywhere near the stock market unless it’s worth at least a billion. 

After a billion, of course, comes a trillion. That’s a thousand billion. In April US President Joe Biden was dealing in trillions and, if Amazon profits keep rising, it surely cannot be long before the world has its first trillionaire. 

As you will see below, April was a relatively quiet month on the world’s stock markets. The FTSE did at one point go through the 7,000 barrier and although it ended the month just below that level  was one of the world’s better performers. It was certainly a good month in the US and the new President announced unprecedented levels of investment – or spending. 

The International Monetary Fund had started the month with an optimistic forecast, predicting that the UK will have growth of 5.3% this year and 5.1% next year. Forecasts for global growth were upgraded slightly, to 6% this year and 4.4% in 2022. 

The UK and Australia agreed the ‘vast majority’ of a trade deal as Australia stepped back from trade deals made with China. There was gloomy news for the Eurozone economy and a potential political earthquake started to seem possible in Germany. And finally, a record that we thought would never be beaten was comprehensively smashed. 

As always, let’s look at all the details…


As mentioned above, the IMF duly delivered its growth forecast for the UK. There were other, rather more anecdotal predictions of economic recovery this year. Bank of England deputy governor Ben Broadbent said the UK would see ‘very rapid growth’ over the next two quarters as people rush to spend the money they have saved during lockdown. Barclays boss Jes Staley went even further, saying that ‘we estimate the UK economy will grow at its fastest rate since 1948’ as the bank unveiled profits more than doubling to £2.4bn for the first three months of the year. 

That will certainly be the case if International Trade Secretary Liz Truss gets her way. April saw the announcement that the ‘vast majority’ of a trade deal with Australia has been agreed with the deal expected to be concluded by June. It is believed that this deal could be a springboard for the UK to join the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes countries such Mexico, Japan and Canada in addition to Australia) within the next 12 months. 

In the domestic economy it was the construction sector leading the recovery. Figures for February showed that the UK economy edged up 0.4% in the month, driven by a 1.6% rise in the construction sector with both new builds and repair and maintenance doing well. At the end of the month Nationwide reported that house prices were 7.1% higher than a year ago, with the average property now costing £238,831. One analyst said the housing market was ‘on the boil’ and a story on the BBC reported particularly strong demand for property on the south coast, and on the coast of Wales as people looked to move away from cities. 

Inevitably there was some gloom amid the positive noises about the recovery, principally centring on Government borrowing. Measures taken to combat the pandemic have pushed government borrowing to its highest level since the end of the Second World War. Borrowing hit £303.1bn in the year to March – nearly £250bn higher than the previous year. The only consolation was that the figure is £24.3bn less than the £327.4bn expected by the Office for Budget Responsibility in its economic and fiscal outlook. 

What of jobs, the high street and – sadly – the companies still making significant redundancies? 

Defence giant Babcock announced that it would cut 1,000 jobs and Asda – thanks to us all baking at home – is to make 1,200 of its bakers redundant. At the end of the month it was reported that ‘time was running out’ to save 5,000 jobs at Liberty Steel, and the BBC reported that 1 in 7 shops is empty post-lockdown. 

More optimistically it was widely reported that shoppers had ‘rushed back’ to the national high street as it re-opened, with shoppers said to be making ‘revenge purchases’ – treating themselves to what they had always wanted as lockdown finally eased. As will be covered below in the US section, the high street has a huge amount of ground to make up and Hammerson – owner of Birmingham’s Bull Ring – will not be the only shopping centre owner to cut rents (by up to 30% in this case) in a bid for survival. Ominously, the month ended with online retailer Boohoo set to announce ‘soaring’ lockdown sales when it updates shareholders on May 5th. 

…But overall April was a positive month for the UK economy, and the FTSE-100 index of leading shares reflected it. The market rose 4% in the month to close at 6,970. The pound was virtually unchanged against the dollar in percentage terms, and closed April trading at $1.3817. 


The month did not get off to the best of starts in Europe as France began its third period of lockdown, with schools closing and people being banned from travelling more than 10km (just over six miles) ‘without good reason.’ 

German’s Commerzbank did little to lift the gloom when it announced a $3.3bn (£2.4bn) loss as it continued to deal with the impact of the pandemic. The bank has said it will cut up to 10,000 jobs and close ‘hundreds’ of branches as it looks to return to profitability this year. In contrast Ryanair got off relatively lightly, saying that last year’s losses will ‘only’ be £732m. 

The Purchasing Managers’ Index which came out in the middle of the month seemed to confirm that the pace of recovery was lagging in Europe with the service sector in Spain and Italy particularly slow to recover. This was confirmed at the end of the month when figures for the first quarter showed that the Eurozone economy had fallen back into recession, shrinking by 0.6% in the first three months of the year, having been hit by a renewed surge in infections and the consequent restrictions and lockdowns. 

In roughly five months’ time Germany will be going to the polls. Could we see the first Green Chancellor? Currently the Greens are leading in the polls, pledging to spend €500bn (£435bn) on a ‘socioecological transformation’ of the economy, which would see increased welfare payments and wealth taxes, a doubling of carbon taxes, a ban on short-haul flights and increased income taxes – plus a 30 hour working week and the right to work from home. The Green candidate to replace Angela Merkel would be 40 year old Annalena Baerbock. 

Meanwhile on the opposite end of the political spectrum the far-right Alternative fur Deutschland (AfD) appears close to embracing ‘Dexit.’ “We consider a withdrawal of Germany from the EU and the establishment of a new European Economic and Interest Community necessary” said the party. 

Away from the potential political upheaval April was a reasonably good month for Europe’s two leading stock markets. The German DAX index was up 1% to 15,136 while the French market was one of the month’s better performers, rising 3% to close April at 6,269. 


The ‘simply staggering’ numbers referred to in the introduction are, of course – despite the best efforts of Commerzbank – a reference to this section. More of Amazon’s profits and the President’s ‘once in a generation’ plans below…

The month got off to an excellent start on the jobs front as the US economy added 900,000 jobs and the recovery continued. The impressive numbers were largely driven by re-openings at restaurants, bars, construction sites and schools. There was more good news when US medical authorities gave fully vaccinated Americans the go-ahead to begin travelling again, both at home and abroad. 

As will be covered ahead, April brought a trade spat between China and Australia, but the US also had its share of international tension in the month. Three companies and four branches of China’s National Supercomputing Centre were added to the US blacklist, meaning companies cannot export technology to the groups without prior approval. Sanctions were also imposed on Russia for what the Biden administration described as ‘harmful foreign activities’ – cyberattacks to you and me. 

…And so we come to the numbers. As we all know, there have been winners and losers from lockdown. A surge in iPhone sales – especially in China – has seen Apple’s profits double since the beginning of the pandemic. Alphabet, the parent company of Google, saw net profit jump by 162% to a record $17.9bn (£13bn) in the three months to March as advertising revenue grew by a third. Facebook revenues for the first quarter leapt from $17.7bn (£12.8bn) a year ago to $26.1bn (£18.9bn) this year. Tesla made $438m (£317m) in the first quarter of the year, although this was dented somewhat by paying CEO Elon Musk $299m (£216m) – part of the controversial compensation package agreed in 2018. 

It was Amazon’s figures, though, that really caught the eye, and illustrated just how much of a shift we have made to shopping online – and how much damage the pandemic must have done to high streets and shopping malls around the world. 

Although the profits were not as large as Alphabet’s, every aspect of Amazon’s business from video streaming to grocery delivery, has done well during the pandemic. Revenue for the January to March period rose from $75bn (£54bn) last year to $108.5bn (£78bn) this year, with profits of $8.1bn (£5.86bn) – more than treble what it was in the same period last year. City AM did the maths and reported that Amazon made $13,000 (£9,400) per second in sales during the quarter. 

With figures showing that the US economy grew at an annualised rate of 6.4% in the first quarter, one analyst said that Amazon could be on the verge of a ‘golden age.’ 

All the company figures, though, were dwarfed by the President’s announcement of a $4tn (trillion) “once in a generation investment in America itself.” Joe Biden unveiled the American Jobs Plan and the American Families Plan which would, he said, be paid for by rises in corporation tax and by taxes on the ‘wealthiest 1%.’ The plans were met with fierce opposition by the Republicans but, with the Democrats holding the balance of power in both the Senate and Congress, they are likely to ultimately get the go-ahead. 

With the economy accelerating, companies posting record profits and the President announcing that level of investment it was no surprise that April was a good month for US stock markets. The Dow Jones index rose 3% to 33,875 while the more broadly based S&P 500 index was up 5% to end the month at 4,181. 

Far East 

China was one of the very few countries to see its economy grow in 2020. As the major Western economies all contracted, China reported growth of 2.3%. It was therefore no surprise when the Forbes annual rich list revealed that Beijing had overtaken New York as the city with the most billionaires, adding 33 last year to take its total to a nice, round 100. 

…And there could be more next year, as figures showed the Chinese economy up 18.3% on a year-on-year basis in the first quarter as it continued to recover from the pandemic. 

That said, the Chinese regulators are flexing their muscles and no-one – not even Jack Ma, boss of Alibaba and generally reckoned to be China’s richest man – is outside their reach. The regulators slapped a huge fine on Alibaba – equivalent to just over £2bn – saying the company had ‘abused its dominant market position’ for several years. The company accepted the fine, and duly vowed to change its ways. Meanwhile in Hong Kong Jimmy Lai, billionaire owner of the Apple Daily tabloid, was sentenced to 14 months in jail for his part in the pro-democracy protests. 

Away from China, Samsung pushed its profits to the highest level since the pandemic began. First quarter profits were the best since 2018 at $6.4bn (£4.6bn) on the back of strong mobile sales. There was also strong demand for TVs and home appliances – just as in the UK, if you’re going to be trapped at home, you have to spend the money on something…

On the political front tensions between Australia and China continued to escalate. The Australian government used new powers to rip up deals made between the state of Victoria and China as part of China’s Belt and Road initiative. The government said it was backing out of the agreements to ‘protect Australia’s national interest.’ The Chinese government called the move ‘provocative.’ 

Of the region’s stock markets South Korea had the best month – the market there rising 3% to 3,148. Hong Kong’s Hang Seng index rose 1% to 28,675, while China’s Shanghai Composite index managed a gain of just five points, closing the month at 3,447. The Japanese market was down 1% at 28,813. 

Emerging Markets 

The main story in the Emerging Markets section of the Bulletin was, of course, the surge in Covid cases in India. 

The middle of the month had seen huge crowds gather to bathe in the Ganges during the Kumbh Mela religious festival, even as a second wave of the virus swept through the country. We will all have seen the tragic scenes from India on various news bulletins, and the month ended with the daily number of cases passing 400,000 for the first time as the second wave worsened. 

Meanwhile in Russia thousands of people joined unauthorised rallies to protest against the continuing detention of jailed opposition leader Alexei Navalny, amid demands that he receive proper medical care. Navalny finally ended his hunger strike and was described as a ‘gaunt skeleton’ for his latest court appearance. Unsurprisingly, the verdict did not go in his favour.  

It was a relatively quiet month for the three major stock markets we cover in this section. The Indian market drifted down 1% to end the month at 48,782: Russia’s stock market managed to gain just two points in the month to close at 3,544, while the market in Brazil rose 2%, to close April at 118,894. 

And finally…

Last month’s ‘And finally…’ was not one of the best. For some reason the world seemed to be in a disappointingly sensible place in March. Fortunately the natural order of things was restored in April. 

Having recently written that pet food pouches were expected to be in short supply we must, sadly, start the month with even worse news. There is a shortage of garden gnomes. With garden centres being open during lockdown there has, apparently, been a ‘massive upswing’ in sales of garden gnomes. Well, yes, when you’ve only been able to talk to your household for three months, a new face might be appealing.

The situation has not been helped by a shortage of raw materials which – inevitably, has been made worse by our old friend, the Suez Canal blockage. 

April looks like it was a good month for our learned friends. Marks and Spencer has begun legal action against Aldi, arguing that their Cuthbert the Caterpillar cake infringes its Colin the Caterpillar trademark. They duly lodged an intellectual property claim in the High Court – and a very expensive Queen’s Counsel will shortly be arguing the merits of a cake being intellectual property. No doubt other barristers will be queuing up for a slice of the action…

You may remember Spanish civil servant Joaquin Garcia, who failed to turn up for work – but was still paid – for six years, and was only caught after becoming eligible for a long service award.  There was a record you thought would never be beaten. But April brought news of a – sadly unnamed – Italian hospital employee who appears to have skipped work in the southern city of Catanzaro for 15 years. He was paid €538,000 (£464,000) in the time he was not working, and is now being investigated for fraud – along with six managers.

…And that’s it for this month. Except for the news that fund manager Standard Life Aberdeen is having a re-brand. Having no doubt paid design and brand consultants plenty, they are to re-emerge as abrdn. The almost vowel-less re-brand (the A is apparently from Standard) is described to be ‘modern’ and ‘dynamic.’ 

Of course it will – and not for one minute will we be left behind. We’ll be back this time next month, with our modern and dynamic MRKT CMMNTRY.


Major pension funds commit to net zero carbon by 2050

Thursday, April 1st, 2021

A new Net Zero Investment Framework has been launched by the Institutional Investors Group on Climate Change (IIGCC) which outlines a commitment to net zero carbon emissions by 2050. The framework aims to encourage investors to develop an investment strategy that achieves net zero, and the framework is already being put into practical use.

At the time of writing, 36 investors collectively managing assets of over £6.1trillion have adopted the framework. Among these investors are a significant number of pension schemes: Scottish Widows, the Environment Agency Pension Fund, Royal London, National Grid UK Pension Scheme, the Church of England Pensions Board, Brunel Pension Partnership, Northern Local Government Pension Scheme, Lloyds Banking Group Pensions Trustees Limited and Nest. 

The investment framework is designed to deliver on the Paris Agreement goal of keeping global warming well below 2 degrees celsius, compared to pre-industrial levels, preferably below 1.5degrees. It’s built upon three specific types of target which will be used to measure success. These are portfolio level targets for decarbonisation and investment in climate solutions, timebound portfolio coverage targets for companies and assets to meet net zero or aligned criteria, and engagement coverage threshold ensuring intensive engagement to drive the transition. 

UK Pensions Minister, Guy Opperman, had this to say about the framework: “Bringing climate change to the top of the agenda and ensuring that Britain’s pension investments act on managing climate change risk will not only help the UK reach net zero, but ensure a brighter future for all.”

“In the run up to COP26 (the UN Climate Change Conference) more countries than ever are signing up for net zero. This creates huge opportunities, but also risks, for institutional investors such as pension schemes. That is why we’re the first major economy to legislate to require pension schemes to set targets to manage their own climate risks.”

“I therefore welcome both the ambition and hugely practical guidance contained in this framework, which will help even more institutional investors aim for net zero.” 


Can Investing in one Company make you a Millionaire?

Wednesday, February 3rd, 2021

We all know that investments can rise and fall in value. That a prudent investor spreads their risk across different sectors and across different markets. And we all remember our very first financial adviser, our Grandma, who told us not to put all our eggs in one basket. 

But between Christmas and New Year there was a story on the BBC about the soaring share price of electric car maker Tesla which has created what it described as an ‘army of millionaires’ – the so-called ‘Teslanaires.’ 

Shares in Elon Musk’s company soared more than 700% in 2020, making Tesla the world’s most valuable car company, Elon Musk the world’s richest man (overtaking Jeff Bezos of Amazon) and making many investors in the company millionaires. 

But as the article rightly points out, it has been a bumpy road for Tesla. In May of last year Elon Musk wiped $14bn (£10.2bn) off the company’s value when he carelessly tweeted that, in his opinion, the Tesla share price was too high. 

We all need to remember that for every Tesla there is a Sirius. Sirius Minerals was a mining company, granted the right to mine potash in the North Yorkshire Moors near Whitby. Many local investors, swayed by stories of the potential returns, invested heavily, putting their life savings and pension lump sums into the company. But the shares steadily dropped, the company was eventually taken over with the shares trading at 5.5p and the local investors were left facing heavy losses. 

Yes, shares like Apple, Nike and Starbucks may have produced spectacular returns for investors on their way to becoming household names, but many, many companies have gone in the opposite direction. April 2019 saw Debenhams go into administration and what could have been safer than the British high street? Surely people will always need to shop, they will always need new clothes… But that was before the pandemic when 2020 was the worst year for high street job losses and store closures in 25 years. 

There will always be winners and losers in investing and the good news stories, the ‘Teslanaires,’ will always receive plenty of publicity. After all, ‘Investor takes sensible long term decision with their financial adviser’ is hardly a headline story. 

But for our clients, it is the best course of action and always will be. A carefully constructed portfolio, in line with your financial planning goals and consistently monitored by your financial adviser: it may not make the headlines, but it will certainly let you sleep at night.

February Market Commentary

Wednesday, February 3rd, 2021


It might be appropriate to start January 2021 by looking back at last year. At the start of January 2020, we were fairly sure what we would be writing about, which included the run-up to Brexit on the 31st and a gradual thawing of US/China relations with a long-awaited trade deal due to be signed. 

China certainly grabbed the headlines but not for reasons of trade. By the end of January 2020 countries around the world were experiencing the initial impact of coronavirus, and the impact on world stock markets was starting to be felt. 

Ultimately 2020 was a year like no other but, as we reported last month, the majority of stock markets actually made gains in the year. 

So what did January 2021 bring us? The roll-out of more vaccines finally gave hope of an end to the pandemic but there was also some bad news, especially on the UK high street and in the US jobs market. January wasn’t a great month for world stock markets but, as last year very clearly showed, it is only one month. 

As always, let’s look at all the details…


January ended with reportedly around 600,000 people being vaccinated in one day and the month began with business leaders calling for help as the country went into its third lockdown, which now looks set to continue into March. 

By that time Chancellor Rishi Sunak will have presented his Budget. It is rumoured that the furlough scheme will be extended, but will there be more help for business in the Budget? Or will the Chancellor stick to his earlier mantra that he cannot save ‘every business and every job?’

The second part of that statement is becoming all too apparent. As we write (on the morning of February 1st) there is confirmation that Asos are buying the Topshop and Miss Selfridge brands. They are buying the brands and the customer base but they want nothing to do with the shops. Last week Boohoo bought Debenhams on exactly the same basis. 

When the Chancellor stands up on March 3rd he will need to give far more than a reduction in rates, or an online sales tax, if he is to breathe new life into our high streets. 

Perhaps the only consolation for the high street is that it is not the UK car industry. 2020 saw new car registrations down to a 30 year low, with Mike Hawes of the Society of Motor Manufacturers and Traders describing it as “the worst in a generation.” 

On the other side of the coin, Nissan reaffirmed its commitment to car production in Sunderland, with COO Ashwani Gupta describing Brexit as a positive for the industry, saying it would allow Nissan to ‘improve its competitiveness.’ 

In the wider economy, UK GDP was down by 2.6% in November, thanks to another period of lockdown. Inflation doubled in December to 0.6% due to a rise in transport costs and, to no-one’s surprise, Government borrowing in December set a new record. At £34.1bn borrowing in the month was the highest December figure on record, and the third-highest for any month since records began in 1993. 

Fortunately there was some light amid the gloom. Bank of England boss; Andrew Bailey; told City AM that he expected a ‘pronounced recovery’ as the vaccination roll-out continued. 

Perhaps even more encouraging is that the entrepreneurial spirit was alive and well. More than 29,000 new companies were registered in the UK in September, the highest number since October 2007 and the third-highest monthly figure since records began in the late 1980s. Confidence among more established businesses appears to be returning not just in the UK but around the world. City AM reported that companies raised $400bn (£292bn) in the first three weeks of the year as central governments continued to stimulate their economies. 

What about the FTSE-100 index of leading shares in January? Sadly it fell back 1% in the month to close at 6,407. The pound was unchanged against the dollar in percentage terms, ending the month at $1.3700. 


The month in Europe began with shareholders approving the merger between Fiat Chrysler and France’s PSA group, which will create the world’s fourth biggest carmaker. 

It was also a successful start to 2021 for Europe’s police forces, as an international operation led by Europol took down what it claimed was the world’s largest illegal platform on the ‘dark web.’ Dark Market had more than 2,400 people selling drugs, counterfeit money and anonymous sim cards; in total worth more than €140m (£124m). German authorities arrested an Australian citizen near the German-Danish border. 

At one point in the month it looked as though Germany might close its borders over worries about possible Covid-19 mutations. There are certainly plenty of worried faces in the country, with Reuters reporting that German business morale had ‘slumped.’ 

There are also concerns about who will replace Angela Merkel. Germany is due to elect a new Chancellor in eight months’ time and as yet the ruling CDU party has failed to come up with a viable successor to Merkel. 

One European leader who wasn’t waiting eight months was Italian Prime Minister Giuseppe Conte, who resigned over criticism of his handling of the pandemic. Reportedly almost half of Italian voters want Conte to remain as PM, but with the political parties divided over spending as a way out of the consequent economic downturn; it is not clear if he will be able to form a new coalition government. 

Like most of the major Western stock markets; the German and French indices both drifted downwards in January. Germany’s DAX index was down 2% at 13,433 while the French stock market fell 3% to 5,399. 


January was, of course, the month when ‘45’ gave way to ’46.’ Joe Biden was sworn in as the 46th President of the United States. 

Biden immediately signed a swathe of executive orders. The US will rejoin the Paris Climate Accord and 11m illegal immigrants were granted an amnesty. Other measures followed as he started to unpick Trump’s legislation. 

Will we see a more conciliatory attitude to China from the new administration? The US/China tensions continued right up to Trump’s last days in office as he banned eight Chinese apps including popular payment platforms Alipay, QQ Wallet and WeChat Pay. 

As we all now know, the pandemic has been good for billionaires. January saw a change at the top of the leaderboard, with the soaring share price of Tesla allowing Elon Musk to overtake Amazon’s Jeff Bezos and claim the ‘world’s richest man’ title. 

January was a month which underlined, if it needed underlining, the pace of change in the American economy. Tesla is now the world’s most valuable car company and set a record for delivery of new vehicles. It also moved closer to launching in India and recorded its first quarter of $10bn (£7.3bn) in sales. 

Apple duly reported sales of $111bn (£81bn) for the fourth quarter, which was up 21% on the previous year. Facebook revenue was up to $28bn (£20.4bn) in the fourth quarter (up 25% on last year) and Netflix went past 200m subscribers. 

…But there was bad news for the wider US economy which lost 140,000 jobs in December, the first fall since April, as rising Covid-19 cases and the cold weather took their toll, especially on restaurants and bars. 

One analyst described the figures as being “so bad, they’re good”, meaning that they would force the incoming Biden administration to introduce stimulus measures. The new President duly unveiled a $1.9tn (£1.4tn) stimulus plan for the economy, including a direct payment of $1,400 (£1,020) to all Americans. The package also included $415bn (£303bn) to fight the virus and $440bn (£321bn) for small businesses. 

The Dow Jones index fell 2% and through the 30,000 barrier to end the month at 29,983. The more broadly-based S&P 500 index was down 1% to 3,714. 

Far East 

Official figures have revealed that the Chinese economy grew by 2.3% in 2020. That may be its slowest rate of growth, but China will be the only major economy to have grown at all last year and growth in the final quarter was an impressive 6.5%. 

January started with more mass arrests of pro-democracy activists in Hong Kong, and it ended on a similarly bellicose note with Beijing warning Taiwan that any attempt to seek independence ‘would mean war.’ 

As the Trump Presidency entered its final days, the spat between China and the US continued. China brought in new laws that will allow courts to punish firms that comply with ‘unjustified’ foreign laws. The US accused China of falling short on its commitment to buy an extra $200bn (£146bn) of US goods in 2020 and 2021. 

Tellingly, figures released by the United Nations showed that China overtook the US as the world’s top destination for foreign investment last year. New investments in the US halved last year, whilst direct investment into China rose by 4%, allowing it to overtake the US. 

The Shanghai Composite index had a quiet month and was up just 10 points, unchanged in percentage terms at 3,483. The Hong Kong market was up 4% to close January at 28,284; while the market in South Korea was also up 4% at 2,976. Japan’s Nikkei Dow index rose a rather more sedate 1% to close at 27,663. 

Emerging Markets 

‘May you live in interesting times, Mr Bond,’ as countless villains have said to the hero. It appears that Vladimir Putin has said much the same to his arch-critic Alexei Navalny who flew back to Russia for the first time after allegedly being poisoned with a military-grade nerve agent. 

Navalny was immediately arrested, as were 1,500 of his supporters who took to the streets in protest. The final Sunday of the month saw more protests, with reports suggesting up to 5,000 people had been detained across the country. 

With rumours circulating of Putin supposedly owning a ‘Black Sea palace’, which Navalny alleges was paid for with ‘the biggest bribe in history’, this may be one of the longer stories of the New Year. 

Rumours also continue to swirl around Vladimir Putin’s health, so Russia could be in for an ‘interesting’ year in 2021. 

The Russian stock market remained stoically unmoved by the unrest and speculation, dropping back just 12 points in the month to end unchanged in percentage terms at 3,277. 

There was bad news in Brazil, with Ford announcing the closure of its last three factories in the country, putting an end to decades of manufacturing in the country, with 5,000 people expected to lose their jobs. 

The company, which is undertaking a global restructuring, blamed ‘significant losses’ in the region. January was a disappointing month for the Brazilian stock market, which fell back 3% to close at 115,068. 

The Indian market was down by a similar amount, ending the month at 46,286. 

And finally 

With millions of children facing the ordeal of Zoom lessons with their teachers and, presumably, tiresome questions, one boy managed to avoid the interrogation. The young whippersnapper changed his name to ‘Reconnecting’. Apparently it took his teacher several weeks to twig that she hadn’t heard from him for a while…

Meanwhile the world’s elite tennis players were flying down under for the Australian Open tennis, only to be quarantined in their hotels for 14 days. Obviously they still needed to practice, so several of the players took to training in their bedrooms. We have all heard noises we’d prefer not to hear from the next bedroom, but perhaps not 400 backhand volleys hitting the wall at three in the morning. A clear case of game, set and mattress…

Finally, some clients may worry that we are living in an increasingly ‘Big Brother,’ tech dominated world, particularly as facial recognition becomes ever more prevalent. 

Sadly, ladies and gentlemen, you may soon have more to worry about than just your face being recognised. One Chinese technology company gave all its staff cushions, supposedly for their wellbeing. The staff were told that the cushions would monitor vital signs such as heart rate and breathing and even pick up on poor posture. 

If only that were true. One employee got an angry message from HR demanding to know why she had not been at her desk between 10.00 and 10.30am, followed by a threat to cut her bonus. 

“I felt like I was being spied on,” said Ms Wang. 

Quite so. And if you’re reading this, Big Brother, some of us in the office are not as young as we once were. If you’re thinking of spying on us, our faces may be a better bet after all…

December Market Commentary

Wednesday, December 9th, 2020


Is the end of November a time to celebrate? All the stock markets we cover in the Bulletin made significant gains in the month; the UK’s second national lockdown ends this week and, as we write, Christmas is a little over three weeks away. 

Or is the glass half-empty? We’re going to come out of lockdown into far harsher tiers than we’ve previously experienced. There are already dark mutterings of the tiers extending well into the New Year and, for many families, Christmas is going to be very different this year. 

A lot happened in November. It brought us the Chancellor’s Spending Review and perhaps the clearest indication yet of the impact the pandemic has had on the national high street, as the Arcadia group slid inexorably towards collapse and the potential loss of 13,000 jobs. 

November also, of course, brought us the US Presidential Election and – despite the threat of endless lawsuits – the almost certain inauguration of Democrat Joe Biden on Wednesday January 20th. But could Vladimir Putin be on his way out as Joe Biden comes in? There were plenty of rumours circulating about the Russian President’s health, with suggestions that he might even stand down in January. 

Meanwhile the Bulletin’s longest running saga rumbled on. With just a month to go to the end of the transition period there is still no agreement between the UK and the EU, with fishing proving to be the latest stumbling block. Did anyone ever doubt that the negotiations would go right down to the wire? No, neither did we.

Most significantly though, November brought hopes of an anti-Covid vaccine in many countries, with claims that the vaccine developed in the UK is 90% effective. If you’re looking for a reason why stock markets did so well in November, look no further. 

As always, let’s delve into the details. 


The big news story of the month in the UK was the Chancellor’s Spending Review. Rishi Sunak had long since cancelled the Autumn Budget because of the economic uncertainty, instead presenting a 30 minute outline of the Government’s spending plans for next year. 

Despite the continuing costs of the pandemic – and despite Government borrowing for October being the highest on record – he outlined some lavish commitments, including what he described as a £100bn “once in a generation” investment in the nation’s infrastructure, including a £15bn commitment to research and development.

This came despite a forecast of Government borrowing reaching £394bn this year, with the Office for Budget Responsibility predicting that the economy will contract by 11.3%. Unemployment is forecast to reach 7.5% next year, with 2.6m people out of work. 

The Chancellor – as Chancellors must – remained optimistic in his speech. But November brought the usual mixture of good and bad news. 

Having mentioned Arcadia in the introduction, which we wrote on November 30th, this morning brings news that last-ditch rescue talks have failed, and Debenhams is set to close with the potential loss of 12,000 jobs. Coming on top of the earlier news about the collapse of Peacocks and Jaeger – which has put 4,700 jobs at risk – this all adds up to a devastating month for traditional UK retail. Quite what these closures will mean to some town centres hardly bears thinking about. 

2020 has also been a very bad year for the UK car industry. Figures released for October showed that production was down again, with production in the month just 20% of that recorded in October 2019. November also brought the news that the Government is bringing forward its ban on the sale of new diesel and petrol cars, which will now be effective from 2030. 

Figures from the Office for National Statistics showed that the UK economy had grown by 15.5% in the third quarter. On the face of it that is good news, but there are worries that the rate of growth is slowing down. The UK economy was 9.7% lower in the third quarter of 2020 than in the same quarter in 2019, and some commentators fear that it could shrink again in the fourth quarter. The ONS also revealed that Government borrowing had soared in October, reaching £22.3bn for the month, the highest October figure since records began in 1993. 

Whether you consider this next item to be good news will depend on where you are on the housing ladder. UK house prices grew at an annual rate of 6.5% in November, the fastest rate since January 2015 as the stamp duty holiday continued to boost the market. 

Despite the overall gloom – especially in the retail sector – the FTSE-100 index of leading shares had a good month. As we have mentioned in the introduction, the reason was simple: hopes of an effective vaccine. November delivered news of the vaccine developed by AstraZeneca and Oxford University, with claims that it could prevent up to 90% of people from becoming ill. 

Boosted by this news the FTSE had one of the best months in its history: having started the month at 5,577 the FTSE ended November up 12% at 6,266. The pound was up 3% against the dollar and ended November trading at $1.3352. 

Brexit and Trade 

The UK’s Referendum on leaving the EU was held on 23rd June 2016, with the UK ultimately leaving the European Union on January 31st this year. Ten months later – and nearly 4½ years after the Referendum – the negotiations rumble on. The transition period – the time agreed in order to reach a trade deal – ends on December 31st, less than a month from now. 

Effectively, it is much less than a month, given the Christmas holiday period and the need to get any agreement ratified by all the EU member states. 

In November the Governor of the Bank of England said that the long term effects of a ‘no deal’ Brexit would prove more damaging to the economy than the pandemic. He may or may not be right: what is undeniable is that, as we write, there are still a lot of points of disagreement, not the least of which is fishing rights. 

The UK apparently labelled the EU’s latest offer on fishing rights ‘derisory’ with Michel Barnier reportedly telling EU ambassadors he had offered a 15% to 18% reduction in the bloc’s fishing rights in British waters. 

With Christmas and Covid, could there be a chance that an extension to the transition period will be agreed? You wouldn’t bet against it. Meanwhile, with very little negotiation, the UK signed a rollover trade deal with Canada. 


It looks as though EU leaders might be negotiating with Poland and Hungary as well…

Back in July EU states had agreed a €1.1tn (£980bn) budget for 2021-2027 and a €750bn (£671bn) Covid recovery fund. Now Hungary and Poland have blocked approval of that budget, vetoing it at a meeting in Brussels. 

The EU is already investigating both countries for supposedly violating the ‘democratic principles enshrined in the EU’s founding treaty.’ Violating that ‘rule of law’ could cost both countries billions of euros in EU funding, so it is hard not to see this as a tit-for-tat retaliation as tensions between Brussels and some of the former members of the Soviet bloc increase. 

In happier news many countries in Europe – including France, Germany and Spain – have eased Covid restrictions in the run-up to Christmas, although restrictions on large scale Christmas and New Year gatherings remain in place. 

From happier news to much happier news. Like all the markets we cover in the Bulletin the German and French stock markets performed strongly in November. Germany’s DAX index rose 15% to close the month at 13,291 while the French stock market did even better, closing up 20% at 5,519.


It seems a long time ago now but November started with the US Presidential Election. The actual poll has almost been forgotten in the welter of claims and counter-claims that have followed it, and the debate on whether the 45th President will formally concede to the man who will be the 46th. 

According to the website RealClearPolitics Joe Biden now has 306 votes in the Electoral College to Donald Trump’s 232, having captured 51.1% of the popular vote. The conspiracy theories about electoral fraud will remain, but it will be Biden who will be inaugurated on January 20th. 

If the likely members of his Cabinet are any guide, then he will pursue policies very similar to the Clinton and Obama administrations: this morning brought the news that former Chair of the Federal Reserve Janet Yellen will be his Treasury Secretary. 

We have mentioned the Spending Review above and Rishi Sunak’s commitment to a £15bn programme of research and development. To put that into perspective, Apple is reported to have spent £18.75bn (£14bn) on R&D in its 2020 fiscal year. Then again, the recent rise in the price of Apple shares did make it worth more than the combined value of all the companies in the FTSE-100 index. 

There is no doubt that the pandemic has been good to the FAANGs: Facebook, Apple, Amazon, Netflix and Google who, between them, account for almost 15% of the value of the S&P500 index. 

We may soon need to add a T to that acronym. November’s rise in the share price of Tesla meant that Elon Musk overtook Bill Gates to become the 2nd richest man in the world – behind, of course, Amazon’s Jeff Bezos. 

Unsurprisingly November was a good month for the stock indices in the US. The Dow Jones index broke through the 30,000 barrier at one point, closing at an all-time high of 30,046. By the end of the month it had slipped back to 29,639 for a gain of 12% in the month. The S&P 500 index was up 11% to 3,622. 

Far East 

November was a bad month for Chinese fintech giant Ant Group, as the Chinese authorities pulled the plug on its planned stock market flotation, which would have raised over $34bn (£25.6bn) and been the world’s biggest ever stock market debut. There are increasing signs that the authorities in Beijing are looking to stamp down on what they see as the excessive power of the country’s internet giants.

The big news in the Far East was the signing of the Regional Comprehensive Economic Partnership (RCEP) which saw 15 countries – including Australia and New Zealand – form the world’s largest trading bloc, covering nearly a third of the global economy. 

Some commentators see the RCEP as an extension of China’s influence in the region, but speaking a few days later at the Asia-Pacific Economic Cooperation forum, Chinese leader Xi Jinping was at pains to stress that China would open up its ‘super-sized’ economy to more “high quality goods and services.” 

…Not, though, to Australian wine. As trade tensions between the two countries continued, China slapped duties ranging from 107% to 212% on Australian wine imports, citing ‘anti-dumping’ concerns. Perhaps McGuigans might like to dump their wines in the UK instead…

You suspect that trade tension between China and the UK may also increase, as the UK Government brought forward its ban on using Huawei equipment in the country’s 5G infrastructure. 

What of the stock markets? China’s Shanghai Composite index rose 5% in the month to end November at 3,392. The best performance in the region came in Japan, where the Nikkei Dow rose 15% to 26,434. The South Korean index was up 14% to 2,591 while the Hong Kong market rose 9% to 26,341. 

Emerging Markets 

A topic that has been discussed, and relatively recently, is that of Russian President Vladimir Putin cementing his hold on power in the country and paving the way to becoming ‘President for life.’ Now it appears that may not be the case: November saw rumours circulate about Putin’s health, with suggestions that he might step down in January. 

The Kremlin has denied claims that Putin is to quit, and that he might be suffering from Parkinson’s Disease. State officials say that the President is in ‘excellent’ health, while the rumours insist his family have urged him to stand down in the New Year. We won’t have to wait long to find out…

The Russian stock market was far more influenced by claims about the effectiveness of the country’s new anti-Covid vaccine, the splendidly named Sputnik V, and was up 15% in November to close the month at 3,108. The Brazilian market did even better, rising 16% to 108,893 while the Indian stock market rose 11% to 44,150.

And finally 

Back in the mists of prehistory, when we first became interested in investment, there was one thing we couldn’t understand. How could, for example, the Chinese stock market be at 3,000 while the Japanese market was at 24,000? Did that mean Japan’s market was worth eight times China’s market? Surely not…

The answer, of course, was that it all depended on the base figure used when the index was first created. But thank goodness we never encountered the Venezuelan stock market in those early days. The Bursatil made some significant gains in November – and closed the month at 1,142,802…

The FTSE reaching Venezuelan levels aside, if we had a wish for this section it would be to turn back the clock. Drones have been much in the news this year and there can’t be many people who haven’t seen one flying. It is only a matter of time before the Amazon drone touches down in your back garden. 

But how did we miss this story? Back in January 2018 two brothers from Germany made a drone that could carry a person – surely the future of travel. They made the drone out of an old bathtub and successfully carried out a manned flight round a local gymnasium. Definitely one that goes in the ‘do not try this at home’ column.

The world has, though, generally been a serious and sombre place for these last few months – and while we’ve all come to know and love Zoom (astonishingly, Primark report that sales of pyjamas are up and sales of business suits are down) – there have still been some good news stories to put a smile on our faces. So let us end the November Bulletin by sending our congratulations to Tilly and Kieran, who married in Bath earlier in the month. 

Tilly and Kieran met at school when they were 12. And they’ve decided to hyphenate their surnames for their life together. We will be back to update you in the first week of January. Have a wonderful Christmas and may 2021 bring everything you would wish for. And in the meantime, please join us in a toast to the happy couple: Kieran White and Tilly Christmas…

How Brexit may affect the Stock Exchanges

Wednesday, November 11th, 2020

As the UK is set to depart from the frameworks of the EU, there is concern amidst London’s biggest share trading venues surrounding the topic of where they may be able to buy and sell European stocks and where they may not.

The dilemma

In order for trading to continue as normal, the EU would have to recognise that the UK and its exchanges are operating with rules and regulations that can be considered ‘equivalent’ to those under which the EU functions. Alasdair Haynes, the Chief Executive of Aquis Exchange who hold 5 per cent of the European Market, is very clear about his view of what is to come. He says, “there will be no equivalence. People are living in a pipe dream if they think it’s going to happen. People are getting prepared to move business over.” 

A declaration of no equivalence means that some EU based institutions will be prohibited from trading in London. That trading will be moved to other European cities, two popular examples of which are Amsterdam and Paris, which leaves London at serious risk of losing its dominance as a share trading centre. 

Currently, London handles up to 30 per cent of the European daily market, the daily market as a whole being worth €40billion. As exchanges opt to move their venues elsewhere in Europe to avoid the implications of share trading obligations (which determine which exchanges investors can trade their liquid stocks in), London’s grip on that 30 per cent will inevitably fall. 

Announced Plans

The London Stock Exchange Group’s share trading platform Turquoise has confirmed through a spokesperson that they now intend to open a base in Amsterdam at the end of November, from which it will trade EU shares. Cboe Europe, the largest stock exchange in Europe who are currently headquartered in the UK, has submitted their application to also establish an entity in the Dutch capital. TP ICAP, who are also headquartered in London at present, has begun discussion with French regulators with regard to setting up an EU base in Paris. While all three of these exchanges intend to keep their London venues where they are, their new plans are indicative of the overriding sense of uncertainty over the shape that Europe’s cross-border share trading market may take post-Brexit. 

David Howson, president of Cboe Europe, stated his concern by saying that “we need to be mindful Brexit doesn’t result in trading reverting back to national exchanges and undo all of the good work we’ve done to bring competition to [the] European equities market over the past decade.” 

November market commentary

Thursday, November 5th, 2020


The end of October brought plenty of bad news for Western economies as scientists stood in front of graphs and talked of ‘inexorable rises’ and ‘exponential increases.’ 

Unsurprisingly, stock markets duly took note. We report on 12 major stock markets and only two, India and Hong Kong, were up in October, with all the major Western markets falling. 

Away from stock markets, October brought us within three days of the US Presidential election. As we write, Democrat candidate Joe Biden is the strong favourite to become the 46th President of the United States. But could Donald Trump upset the odds as he did four years ago? You may well know the answer by the time you read this. 

As we always do, let’s look at all the detail and try to find some light amid the gloom. 


October’s main news for the UK came on the evening of Saturday 31st as Prime Minister Boris Johnson announced a second national lockdown, beginning on Thursday November 5th and lasting until (at least) Wednesday December 2nd. 

The Furlough scheme has been extended for another month and there seems certain to be claims for extra support from those businesses forced to close for a second time. Having scrapped the Autumn Budget and presented his Winter Economic Plan in September, you suspect that Chancellor Rishi Sunak may have to find yet more cash.

The impact of the pandemic is certainly starting to be felt by large employers. October saw EasyJet make its first ever annual loss and pubs chain Wetherspoons, which was founded in 1979, make its first loss since 1984. Rolls-Royce announced that it would look to raise £2bn from shareholders through a rights issue after a “sharp deterioration” in civil aerospace. 

There was more evidence of the inevitable trend away from retail shopping. H&M announced that it would close 250 stores, whilst Edinburgh Woollen Mill, owner of the Peacocks and Jaeger brands, announced that it would appoint administrators, putting 21,000 jobs at risk. The company described trading conditions as “brutal.” 

…And with 69% of Londoners apparently working from home (compared to 18% in Paris and 25% in Berlin), the outlook for the ‘commuter economy’ can only get worse, especially with the announcement of a second lockdown. 

The outlook for the hospitality industry was no better, with prospects for the hotel industry said to be the ‘worst for 50 years’ and the imposition of new rules on alcohol in Scotland described as ‘the death knell’ for the country’s hospitality industry. 

It is, though, an ill-wind. Tesco’s profits surged as their online orders doubled, and ASOS reported that it had added 3 million customers during the pandemic. Kentucky Fried Chicken (KFC) also announced that it would create up to 5,400 jobs in the UK and Ireland. 

In the wider economy, the UK staged some sort of recovery in August. The economy grew by 2.1% as the Eat Out to Help Out scheme boosted restaurants. The figure was, though, below expectations and the economy remains 9.2% smaller than before the pandemic struck. UK inflation rose to 0.5% in September and Government borrowing for the month was £36.1bn, £28.4bn more than last year and the third highest since records began in 1993. 

One pinprick of light at the end of the tunnel was the UK housing market. The lifting of the Covid restrictions was said to have led to a ‘surge in mortgage applications,’ with Nationwide reporting that house prices rose at their fastest rate for five years in October. The average price of a house in the UK is now £227,826. 

As we reported in the introduction, October was not a good month for world stock markets and fears of a second wave of the virus and the consequent lockdown meant that the FTSE-100 index of leading shares had its worst month since March. The FTSE dropped 5% to close the month at 5,577 – below the 5,672 at which it ended March. 

The pound had a relatively quiet month and was unchanged against the dollar in percentage terms. It ended October trading at $1.2954. 

Brexit and Trade Deals 

The month started with the EU taking legal action against the UK for ‘breaching the withdrawal agreement.’ The Prime Minister held ‘last minute’ talks with Ursula van der Leyen, President of the EU Commission, and stated that he didn’t want a ‘no deal’ exit. 

Then the French hardened their demands over access to the UK’s fishing and the prospect of ‘no deal’ was back on the agenda. It was reported that there were ‘significant gaps to bridge’ and by the middle of the month Downing Street was suggesting that the trade talks were ‘effectively over.’ 

Meanwhile, the UK struck a deal with Australia to extend freedom of movement, and concluded a £15bn trade deal with Japan. 


As you will probably know, both France and Germany ended October back in lockdown. France had imposed a night time curfew in the middle of the month but by the end of October the major European economies were in their second period of lockdown as Covid-19 cases soared. 

Where does all this leave the Eurozone economies? There was some good news when official figures showed that Eurozone economies had bounced back by 12.7% in the third quarter of the year, although this was not enough to regain the ground lost earlier in the year. 

…And, of course, measures to protect jobs and businesses have led to a huge increase in debt. A report in the Financial Times suggested that Eurozone budget deficits had risen almost tenfold in a bid to counter the pandemic, with budgets in the red by almost €1tn (£900bn) as President Macron said that the virus would be with us “at least until next summer.” 

Let us, though, finish with Europe’s glass half full, at least for this month. City AM reported that the value of the continent’s top tech firms had ‘soared’ over the last five years, signalling ‘a golden age of tech entrepreneurship on the continent.’ European tech companies are now worth four times what they were four years ago, with their combined value jumping from €155bn (£139bn) to €618bn (£556bn). 

Sadly, Europe’s two major stock markets were more concerned with the possible long term impact of another lockdown. Germany’s DAX index fell 9% in October to close the month at 11,556 while the French stock market was down 4% at 4,594.  


October started dramatically for the President when he tested positive for Covid-19 and spent a few days in hospital. He appears to have made a full recovery and is back on the campaign trail, no doubt cheered by figures from the Bureau of Economic Analysis, which revealed that the US economy had grown at an annualised rate of 33.1% in the third quarter. This was double the previous best, recorded in 1947, and recovered the ground lost in the 2nd quarter when the economy contracted by 31.4%. 

Jobless claims also fell, although they remain at record levels. At the height of the pandemic 6.9m Americans applied for jobless benefits in a single week which is roughly ten times the number seen in the financial crisis of 2007 to 2009. 

October saw US airlines put a combined total of 32,000 staff on unpaid leave as the job recovery slowed down. Figures showed that 660,000 people found work in September but that was well below the 850,000 predicted by economists. There are plenty of people in work at Amazon, but the company revealed that 1.44% of them, nearly 20,000 employees, have had Covid-19. 

In company news, Apple launched the iPhone 12 and business is unquestionably booming for the tech giants. Apple, Google, Facebook and Amazon all reported figures on September 30th and there was one common thread: their growth shows no sign of slowing down. 

US markets were, though, influenced far more by worries about the pandemic than the rise and rise of the tech giants. The Dow Jones index closed the month down 5% at 26,502, while the more broadly based S&P 500 index was down 3% at 3,270. 

Far East 

The month’s most significant story in the Far East was China’s continuing ‘bounce back’ from the effects of the pandemic. 

As manufacturing shut down at the beginning of the year, the Chinese economy contracted by 6.8% in the first quarter of the year, the first quarterly contraction since records began in 1992. However the recovery appears to be well under way, with official figures showing growth of 4.9% for the third quarter compared to the same period last year. This was below the 5.2% predicted by economists, but still confirms China’s rapid recovery from the earlier effects of the pandemic. 

Figures for September showed that both exports and imports were up, with Chinese exports up by 9.9% and imports by 13.2%, cutting the country’s trade surplus for the month from $59bn (£46bn) in August to a paltry $37bn (£29bn). 

It was not such good news for the wider Asian economy, at least in the short term. The International Monetary Fund downgraded its forecast for this year, suggesting that the wider Asia Pacific economy would shrink by 2.2% rather than the previously forecast 1.6%. However, it expects to see growth of 7% next year, driven by the rebound in China. 

In company news Huawei continued to suffer from accusations of collusion with the Chinese government. This was good news for Samsung, which posted a net profit of $8.3bn (£6.4bn) for the third quarter as smartphone sales jumped 50%. 

Chinese technology giant Ant Group confirmed its plans for a joint stock market listing in Hong Kong and Shanghai in the world’s largest stock market debut. The company will sell shares worth $34bn (£26bn). 

On the region’s stock markets it was a quiet month for China’s Shanghai Composite index, which rose just seven points to 3,225. The Hong Kong market rose 3% to close October at 24,107, but the other two major markets both lost ground in the month. Japan’s Nikkei Dow index fell 1% to 22,977 while the South Korean market was down 3% at 2,267. 

Emerging Markets 

November was a quiet month for news in the three major emerging markets that we cover. Brazil has now had 5.3m cases of Covid-19, the third highest figure after the US and India. Despite this, President Jair Bolsonaro has overruled his health minister and said that the country will not be buying a Chinese-made vaccine which, said the President, has not yet completed clinical trials. 

As we mentioned above, India was one of only two stock markets to rise in October, gaining 4% to close the month at 39,614. The Brazilian market dropped 1% to 93,952, while the Russian index had a poor month, dropping 7% to end October at 2,691. 

And finally 

October, clearly, has not been a good month. As we said in the introduction, advisers and scientists have stood in front of graphs and here we are back in lockdown. Fortunately, there have been some lighter moments in the month.

At the beginning of the month firefighters in Hull were called to a bizarre rescue mission. Student Rosie Cole, who had been drinking wine and honey tequila, had been dared by her friends to see if she could fit inside a tumble dryer. Ms Cole gracefully accepted the challenge and climbed inside the clothes dryer. 

You know what’s coming. Ms Cole was duly rescued by the fire service. 

…But by the end of the month the Hull Fire Brigade had been upstaged by their colleagues in Essex, who had to rescue three teenagers who had crawled into an industrial-sized tumble dryer. There was no word on whether honey tequila played any part in the incident. 

The monthly market update will be back at the start of December. Following Saturday evening’s announcement it seems appropriate to send all our clients our best wishes for the coming month. Stay safe, take care of those you love and, of course, resist the honey tequila and the consequent urge to climb inside a tumble dryer…

The Chancellor’s Winter Economic Plan

Thursday, October 1st, 2020

In December 2019, the Conservatives won an 80 seat majority in the General Election and three months later, new Chancellor Rishi Sunak presented his first Budget. But by then there was a large cloud on the horizon – the outbreak of Covid-19. 

The Chancellor used his Budget speech in March to present a raft of measures to support businesses and jobs, promising to do “whatever it takes.” A week later he was back with more emergency measures and on Monday 23rd March, the UK went into full lockdown. 

Six months on from lockdown, the Treasury announced that the Chancellor’s traditional Budget speech had been cancelled for this year and instead he would present a Winter Economic Plan on Thursday 24th September.  

What has happened in the last six months? 

The last six months for the UK economy can perhaps be summarised in two words: ‘recession’ and ‘redundancies’. Figures released for the second quarter of the year – April to June – showed that the UK economy had shrunk by 20.4%. Early hopes of a ‘V-shaped recovery’ from the downturn quickly vanished.

The pandemic has unquestionably accelerated trends that may otherwise have taken 20 or 30 years to arrive. We may well all have been working from home by 2050 but this week, the Prime Minister told office workers to do it for perhaps the next six months. That will surely have serious consequences for many town centres and the ‘commuter economy’. 

These changes have, inevitably, meant widespread redundancies. Figures recently released suggest that UK payrolls shrank by 695,000 in August as the Chancellor’s furlough scheme started to wind down. 

The Chancellor’s Speech 

The Chancellor, Rishi Sunak, was at pains to stress that he’d consulted both sides of industry on the measures he was going to introduce. He was photographed before the speech with Carolyn Fairbairn of the CBI, and Frances O’Grady of the TUC. 

He rose to his feet in a suitably socially-distanced House of Commons and stated that his aim was to protect jobs and the economy as winter approached, and to try and “strike a balance between the virus and the economy.” We were, he said, “in a fundamentally different position to March.” 

Rishi Sunak said that the UK had enjoyed “three months of growth” and that “millions of people” had come off the furlough scheme and returned to work. While ‘three months of growth’ is undoubtedly true, we must remember that the economy shrank by 20.4% in the second quarter. According to the Office for National Statistics, the economy grew by 6.6% in July – but it has only recovered just over half the activity lost because of the pandemic. 

The primary goal, the Chancellor stated, was “nurturing jobs through the winter” as we all faced up to the “new normal.” He conceded, though, that not all jobs could be protected and that people could not be kept in jobs that “only exist in furlough.” 

So what measures did the Chancellor propose? 

Emphasising that he could not protect “every business and every job” the Chancellor conceded that businesses faced uncertainty and reduced demand. In a bid to protect jobs through this period, the first measure he introduced was: 

The Job Support Scheme

  • This is a six month scheme, starting on 1st November 2020
  • To be eligible, employees must work a minimum of 33% of their normal hours 
  • For remaining hours not worked, the Government and the employer will each pay one third of the employee’s wages 
  • This means employees working at least 33% of their hours will receive at least 77% of their pay 
  • The Chancellor also announced that he was extending the support scheme for the self-employed on “similar terms” to the Job Support Scheme 

Pay as you Grow 

After ‘eat out to help out’, we now have the Chancellor’s next catchy slogan: pay as you grow. 

  • Businesses which took loans guaranteed by the Government during the crisis will now be able to extend those loans from six years to ten years, “nearly halving the average monthly repayment,” said the Chancellor. 
  • There is also the option to move to interest only payments, or to suspend payments for six months if the business “is in real trouble,” with no impact on the business’s credit rating. 
  • Coronavirus Business Interruption Loans (CBILS), taken out by a reported 60,000 SMEs, can now also be extended to 10 years.
  • The Chancellor also promised a new government-backed loan scheme, to be introduced in January.

VAT Deferral 

  • Businesses who deferred their VAT during the crisis will no longer have to pay a lump sum at the end of March next year. 
  • They will have the option of splitting it into smaller, interest free payments during the 2021-2022 financial year. “This will benefit up to half a million businesses,” claimed the Chancellor. 

Income tax is deferred – but it still needs to be paid 

As we all know, death and taxes are inevitable. The Chancellor did at least delay one of them for many people…

  • He announced extra support to allow people to delay their income tax bill, which should benefit millions of the self-employed. 
  • Those with a debt of up to £30,000 will be able to go online and set up a repayment plan to January 2022.
  • Those with a debt over £30,000 should contact HMRC and set up a plan over the phone. 

The planned VAT increase is postponed 

  • The Chancellor’s final move was to give direct, targeted help to the tourism and hospitality sectors. 
  • These two sectors had benefitted from a lower VAT rate of 5%. This lower rate was due to end in January, but will now remain in force until 31st March 2021. 

What was the reaction to the speech? 

As with all Budget speeches, the reaction was mixed. Carolyn Fairbairn of the CBI praised the Chancellor for “bold steps which will save hundreds of thousands of viable jobs this winter.” 

Manufacturing group Make UK said the Chancellor ‘deserved credit’ for looking at action taken in other countries such as Germany and France and copying their successful ideas. 

The Adam Smith Institute was more cautious: the Chancellor’s plans were “sensible – but not costless.” Matthew Lesh, head of research at the free-market think tank said, “The Government must resist becoming addicted to spending. Temporary spending is sensible to keep struggling businesses afloat, but in the longer run we are going to have to get the national accounts in order.” 

There was, though, plenty of criticism, especially from the retail sector. Lord Wolfson, boss of Next, warned that ‘hundreds of thousands’ of retail jobs may now become ‘unviable’ in the wake of the crisis. “I wouldn’t want to underestimate the difficulty,” he said, “I think it is going to be very uncomfortable.” 

Where do we go from here? 

As we have commented above, six months, roughly to the end of March, now seems to be the accepted next phase of the fight against the pandemic. As people worry about whether they’ll be able to see their families over Christmas, many will also be worrying about their jobs.

In his speech, the Chancellor more than once stressed that he could not save ‘every job and every business’ and a sharp rise in unemployment through the winter seems inevitable, which will lead to more Government spending on benefits and lower tax receipts. 

The Treasury is already facing a significant shortfall and the Winter Economic Plan, although the level of Government support has been sharply scaled back, will only add to that. At some point, all the support will need to be paid for, either by increased taxes or more optimistically, a resurgent economy. 

What does this mean for my savings and investments? 

Many world stock markets have proved remarkably resilient to the pandemic and are showing gains this year. Unfortunately, the UK’s FTSE-100 index is not one of them: it ended 2019 at 7,542 and closed March as the country went into lockdown at 5,672. As we write this commentary (Friday morning), it is standing at 5,823, up 2.66% on the end of March. 

As we have stressed many times, saving and investing is a long-term commitment and, while there will undoubtedly be plenty of bumps in the road ahead, Governments and central banks around the world remain committed to an eventual economic recovery. Yes, the pandemic has accelerated trends and certain sectors of both the UK and world economies have suffered serious damage; but as we never tire of saying, new companies will find new ways to bring new products to new markets. 

We can, in the long term, still face the future with confidence but we appreciate that some clients may have understandable short term concerns. 

If you have any questions on this report, or on any aspect of the current situation, please do not hesitate to get in touch with us. 

The Chancellor has, we think, taken sensible and prudent action. As he said, “life can no longer be put on hold” and let us hope that economic activity in the UK – and the wider world – quickly reflects that. 

The emotions that arise when investing

Thursday, August 13th, 2020

Emotions are important. We should listen to them… most of the time at least. However, investing is one case when it’s best to let rational thought take priority over your emotions. By all means, listen to your emotions, but don’t be led by them.

Here’s a slightly shocking fact: In 2018, the S&P 500 generated an average return of 9.85% annually. However, research by Dalbar found that the average investor earned roughly half of that: 5.19%.

 Why? Humans are emotional creatures and investing is an emotional experience, therefore investors are tempted to make rash decisions like rapidly selling during a market downturn. 

When investing, a patient, logical approach is usually the most effective over the years. This means prioritising long-term investments over the impulse to buy and sell based on your emotions or short-term goals. 

We’ll admit that it’s hard to avoid becoming entangled in media hype or fear, something that can lead you to buying at the peak and selling at the bottom of the market, so you need to be self-aware enough to recognise when this is happening.


The cycle of investor emotions

It’s common for investors’ emotions to move in something of a cycle, similar to the one shown in the diagram below. The point of maximum financial risk lies at the top of the market curve. Here, there is the potential to make a decision motivated by short term gains, when it’s likely that the best gains have already passed.

Investors who wait until this point are often at risk of ploughing their cash into a market that might soon crash.

On the other hand, during times of rising market volatility, investors should remember the importance of looking beyond short-term market fluctuations and remember that although markets take time to recover, they usually do. If you sell during a downturn due to fear, you risk selling at the point where markets are lowest. 

You are essentially at much greater risk of being harmed by the adverse effects of ‘bad timing’ if you let your emotions get the better of you.

A better perspective

Resisting your emotional impulses isn’t easy while in the grip of a savage bear market or a raging bull. Because of the risk of long term goals being overtaken by emotionally motivated decisions, a mindset shift is necessary.

You should try to avoid thinking of your investments as immediate assets and stop dwelling on the daily fluctuations to your net worth. Rather than thinking “I lost £15,000 today” on the day of a large market fall, try to think in terms of your averages and your long term financial goals. You might have lost £15,000 on a single, awful day, such as some we saw in the ‘Covid Crash’ earlier this year. However, your portfolio might have gained £300,000 in overall value.

A balanced, long term investment strategy generally has a couple of features: 

Firstly, it takes into account that stock markets aren’t rational. You can’t rely on predicting the future of stock markets – billions have been lost on global markets to testify this. 

When looking back at stocks, it’s easy to fall into the trap of thinking “I wish I had invested at this time”. Unfortunately, it’s impossible to actually work out when the perfect time to buy or sell is when it’s actually happening. 

For instance, when markets fall, they often have small rises that form part of an overall downward slope. An investor might think that they are being smart by investing heavily in one of these ‘mini-troughs’, following the much lauded ‘buy low and sell high’ investment strategy. However, there’s no way of knowing for certain that this is actually the lowest point on the stock market. It might just be a momentary trough as part of a much steeper decline.

Another approach could be to consider ‘drip-feeding’ your money into investments, a strategy known as Pound Cost Averaging. 

Secondly, stronger investment portfolios tend to be diversified. There’s that old saying about not putting your eggs in one basket. Investing all your money in one place makes you far more financially vulnerable if those stocks crash. 

A stronger investment strategy would spread your money through different asset classes and different assets within each asset class. 

Whatever investment strategy you use, it’s best to try to gain a bit of emotional distance from your investments. Understanding what emotions you’re likely to be feeling is a good way to enable you to make effective decisions, but don’t let these emotions rule you. Please get in touch if you have any questions about this article.


The world is in recession. Why is the stock market rising?

Thursday, August 13th, 2020

Current World Bank forecasts indicate that the Covid19 recession will be the deepest since WWII and the Treasury’s forecaster has suggested that it could take until the end of 2022 for the British economy to return to its pre-coronavirus peak.

However, global stock markets seem to tell a more positive story. Markets are rallying across the world and have been so doing since their mid-March trough, with the US stock indexes leading the charge. Today, some markets – like the S&P 500 – are close to fully erasing their recent losses.

February and March were difficult months for stock market investors – with the sharp declines the markets were showing and wider economic chaos, sleepless nights were aplenty. Since then the stock markets have generally been positive. Many investors’ portfolios are close to their pre-coronavirus levels.

The divergence between economic news and stock market performance

While stock markets are closely related to the economy, they are not the economy. 

Stock investors look forward, beyond present conditions, into the future. And at the moment they are taking an optimistic view.

There are several reasons for this. 

Firstly, governments have responded with large economic stimulus packages. In Britain, we have had the furlough scheme, loans to support businesses and support for the self-employed. More recently, Rishi Sunak announced a further support package worth up to £30bn, which included measures to protect jobs, help younger workers and encourage spending.

As long as governments continue to support the economy, many investors will be willing to look beyond adverse economic headlines. 

Secondly, the medical news around coronavirus is a bit of a convoluted story, but one which does show promising signs for investors.

While the virus seems to be continuing to wreak havoc around the world with more cases and fatalities each day, the news appears to be reasonably positive on vaccine development and other treatments. If a vaccine is available for mass distribution in early 2021, life may return to normal sooner than expected. 

However, it’s not a foregone conclusion that the stock market surge will last. 

A second wave of coronavirus could require countries to implement stricter social distancing measures that would further dampen consumer spending. And there’s a chance that global finance ministers will not be able to extend the kind of economic support measures offered during the initial lockdown. 

Events like these would likely damage investor confidence in the future, causing stock markets to fall once again.  However, given the fact that many major economies are making a ‘V-shaped’ recovery,  we’d say the prospectus for investors is positive.