Ian’s Insight
Firstly, I hope you and your loved ones are keeping safe and well.
Who could have foreseen the current situation with COVID-19 six months ago and how the world has changed in such a short time? It looks like it could be a great deal of time before we get back to any sense of normality, although all of this could be a “new normal”.
Our offices will remain closed until further notice; we do not intend making any of our staff commute until we can be sure it is safe. That said, it’s pretty much business as usual. Our staff have the ability to do everything they would normally do remotely, and it’s testament to our team that they have adapted so well.
We are still striving to provide the very highest levels of service to all of our clients and will continue to communicate with you on a regular basis. We will still provide you with our twice-yearly valuations and updates, however face-to-face meetings are not possible for the time being. Instead, we will attempt to have either telephone or video meetings when the time comes, which will be safer for both you and us here at Conçerva. We will of course continue to monitor the situation and will update you as and when there are any changes.
Conçerva’s investment committee continues to meet on a regular basis to monitor the investments we recommend. These meetings are taking place in a very different way to how we are used to, and some of us are getting a crash course in video conferencing!
I have asked Brian, our Economist, to give you a brief update on how the pandemic has impacted the economy so far and to let you have his current thoughts on Conçerva’s investment principles; this can be found below.
We will continue to provide regular updates over the coming months, but in the meantime please stay safe and well.
Brian’s Brainstorm
Conçerva’s Pillars in Practice
In the newsletter sent in the first half of March this year, we highlighted three things that may help reduce risks to your wealth in panic driven markets.
Number 1. Your wealth is not invested exclusively in FTSE 100 companies. Over the years the FTSE 100 index has evolved into an “old economy” index overweight in oil companies and high street banks with little exposure to tech companies like Amazon that have thrived in the lockdown scenario. Since global stock markets peaked in mid-February this year, the FTSE 100 index is down 20% while world equities outside the UK have fallen 12%.
Number 2. Your wealth is diversified into financial assets other than equities. We hold sovereign government bonds (both UK and overseas) to reduce the drawdown on your wealth when equity markets are in free fall. From mid-February to 23 March the FTSE 100 index had fallen by nearly a third. But during this period overseas government bonds rose by 13% and UK bonds rose by 5%. A multi asset portfolio helps to mitigate your losses in the worst of times.
Number 3. Do not try to time the market. There is always a temptation to bail out of the stock markets in the face of mounting losses. History tells us that massive one day losses that make the headlines are often followed by significant recoveries that receive less media attention. On March 12, the S&P 500 index (the world’s most important equity index) fell by 9.5%, but rose by 9.3% the following day. Then the index sustained a massive 12% decline on March 16, but this was followed by a 9.4% bounce on March 24. If you bail out on a bad day it is psychologically difficult to get back into the market after a bounce.
So, we are sticking to our game plan.
Statistical Information
| Last Month | This Month | Change | |
|---|---|---|---|
| CPI | 1.3% | 1.8% | +0.5% |
| RPI | 2.2% | 2.7% | +0.5% |
| March 2020 | May 2020 | Change | |
|---|---|---|---|
| Base Rate | 0.25% | 0.10% | -0.15% |