News and views

It could be a Marathon but it won’t be a Sprint – 21/04/20

Next Sunday, April 26th, would have seen the London Marathon take place.  Of course, it was postponed some weeks ago but as a previous participant (three times having said ‘never again’ after the first time, slower and slower by the way) it always brings back some fond memories and the odd wince.  It also is a reminder of the necessary resilience, training commitment and mental attitude to complete the 26.2 miles.  Those qualities are much in evidence now as are the fund-raising initiatives that underscore the marathon.  One can only marvel at the £20 million that 99 year old, Captain Tom Moore raised for the NHS.

Since the third week of March, financial markets have enjoyed a significant rebound resulting in a sigh of relief for many and a case of FOMO (fear of missing out) for some. The sheer size of the financial support from central banks and governments has been a key catalyst as has an expectation of Covid-19 infection and death rates peaking in European countries and the US.  Indeed, Italy and Spain appear to be passed their peaks.

To give some perspective, I’ll use the FTSE All Share equity index as it is a broader reference than the more widely used FTSE 100.  Having fallen 35.5% from the start of 2020 through March 23rd, the FTSE All Share has subsequently rebounded to be up 17% since the low point but still lower by 24.6% from where it started the year.

 

 

 

Source: Yahoo Finance

The question on many investors’ minds is ‘have we seen the bottom or is this just a bounce from oversold levels?’ The latter has certainly occurred as oversold levels brought buyers like ourselves, to put some cash to work and as we have outlined previously, price markdowns happened without much volume so prices rebounded as inventory was light.

Whether we have seen the bottom is another matter.  The ‘whatever it takes’ messages from governments and central banks have helped sentiment hugely and should prevent the illiquidity and market dislocations of mid-March but investors should remember that a return to ‘normality’ will take some time and it will likely be a new normal.

Social Distancing

A much-used phrase and to be honest, an imperfect one.  What the government requires and what we adhere to is physical distancing – six feet apart or not visiting friends, family or the vulnerable.  What we need plenty of is social interaction using the array of technology at

our disposal in order to reduce the mental strain for many who are isolated and not finding it easy.

October 4th  2020

The date of the re-arranged London Marathon and hopefully it will take place but that is not clear at this moment in time.  Let’s hope by then economies are showing signs of life that may lead to a positive quarter of economic performance after a short yet deep recessionary period.  A vaccine may be on the way although not yet widely available and drugs like Gilead Sciences’s Remdesivir could have proved successful in treating those that continue to get infected with Covid-19.  Until then, it is likely that physical distancing will continue to play a part in our society and a return to ‘normality’ while maybe not a marathon, won’t be a sprint. Working practices have likely changed for good.

We continue to transition our portfolios towards the digital economy including cloud computing as supply chains are shortened and we retain our focus on healthcare and nutrition as key themes in the long run.