Bulletin – Present and future

24th July 2020

The present, the transition and the future
Article by Nick Matthews, [email protected]

Change happens. The future is unknown. We all live with risk every day and always have done.  Despite this, levels of wealth, education and health have risen dramatically across the World over the past 50 years or so.

What we are going through now is one in a series of change to risk.  It is incredibly significant, and even though many people are dying or becoming ill, I wanted to take this moment to look at the more positive sides of something often driven by adversity.

Consider the horrors of the Second World War and the growth in technological advances that came in the following decades.  Before that, the Great War saw changes to the social status of millions of people, upending the feudal-like roles of elites and others and so on over and over.

This is a truly significant moment in time for yet further change. Government can incentivise and penalise to encourage actions in particular ways, from sugar taxes to housing support to green energy.  In ordinary times change on a massive scale needs a groundswell of public opinion and acceptance of what is socially acceptable and what is not.


Despite the number of cases of COVID-19, not so much in the UK now where we currently have too few cases to be able to test our own vaccine,  but elsewhere in the US, Africa and beyond, the immediate recovery has been surprisingly strong in many ways.  Retail numbers are likely to get back to where they were within the next couple of months, and retail spending is 3% up compared to June 2019, led by food and drink but also on furniture, computer equipment and homeware reflecting where we have been spending our time.

Offices are opening slowly; people are returning to work and children will be back in school come September.

The shape of employment will change, as will the way we move away from cash and away from the high street, and even the way we take our holidays. But for the coffee shop that closes next to the half-empty office in London, a new one will open along with smaller more flexible office spaces in smaller towns or villages where all of these workers now spend their working days.

Cases of CPVID-19 will rise.

Medical treatments are underway, along with vaccine trials. These are progressing much as we have spoken about, but faster and on a greater scale than before.

We will be better prepared if there is a rush of cases come the autumn. This is important, because the virus is with us for good and we have no choice but to adapt and live with it as we do all the other risks we barely think about in our daily lives.

Throughout this, financial markets have been resilient.  Perhaps it would be better to say the massive monetary printing by global central banks has manged to persuade investors that assets are the place to be, rather than in cash, and so society will not completely fail.  We have been surprised and pleased by the recovery in portfolio values over the past couple of months.

It still seems sensible to be cautious and to keep a healthy cash buffer for both spending and for future opportunities, but our investment team are looking at how to move slowly back into the market at the end of the summer, and possibly more quickly if it seems right to do so.

The future

We have some enormous structural issues to be dealt with climate change, ageing demographics, and debt. All of which we have written about in the past and which shape the way we are investing your money.

The political impact of falling, and perhaps permanently lower, oil prices will reshape the Middle East, as well as Russia and South America.

Closer to home is the return of Brexit, whilst Trump and nationalist attitudes and protectionist policies threaten the status quo.

We must see change and clearly that is happening and quickly. From people not traveling as much, particularly into densely populated offices in the city, to the adoption of digital meetings, the reshaping of our social and employment habits offers the chance to invest in productivity gains that have been missing for so long.

We cannot ignore climate change. Requirements to change and to treat the World more gently will affect behaviour and spending. The devastating floods in China, the wildfires across Russia, and the 10 degree rise in Arctic temperature are testament to the massive impact on the World, and for the need to address this sooner than we probably will.  Both Government and social conscience will demand action.

More change, more investment and different types of jobs are required. 

So, what other opportunities are there because of the virus and the associated and unprecedented global reactions?

If public opinion is a precursor to massive change, and we can see this happening in the way people are working and travelling, what other doors will be opened?

The recovery so far has been led by a small number of predominantly tech and healthcare companies.  The FTSE100 is still down 16% this year, Europe down 12% and the S&P500 in the US, excluding the likes of Facebook, Tesla, Google, and Amazon, would show something more akin to its European cousin.

There is scope for growth.  Add to this the trillions (something like $12 trillion) of new money printed or promised in the past 4 months, which will have to be used somehow, and it looks like inflation in a year or two is much more likely.  Asset prices will go up, those who already have assets will do very well, while those without will just about get by.  This is not good for social equality but is a repeating story to post-financial crisis.

Social conscience evolves.  The Government has the excuse to reshape our care system and to value carers as highly as any NHS staff.  Amazingly, 80% of carers felt they would receive no money if they did not continue to physically do their job through lockdown. They were not offered enough protection, are doing a job many of us would not choose and will become even more important as the population gets ever older.

Our approach

There are huge opportunities and reasons for optimism both financially, socially, and environmentally. The dilemma, as usual, is that we do not know the timescale for change, and for some the time will be more rewarding than for others.

So, everything we have advised this year remains true and sensible. You should have sufficient cash to see you through the coming months, since it is impossible to know what they will bring, yet the other side of it will see real growth potential.

If I were the Government, I would have taken the opportunity to borrow even more. Interest rates will stay low and affordability will be less of a problem than in the past.  The best way to repay the debt is to grow the economy, and this involves growing wages through increased economic activity, and it would be a pity if this opportunity were missed.

Finally, the end of the furlough scheme and other government support will be a testing period, but as this rolls on, we will be looking to invest cash in opportunities over a period of time, and we will be reporting more specifically on this in the future.