What happened through December…
HAPPY NEW YEAR! As we now bid farewell to a turbulent and difficult 2020, the last month of the year delivered a final one, two set of punches and a dose of Christmas cheer. December saw the UK become the world pariah as a new COVID-19 strain was discovered to be spreading at a rate ‘70% faster’ than the original virus. London and the South East were plunged in to a ‘Tier 4’ Lockdown preventing families from celebrating the Christmas period together. The world cut the UK off, including the French at the Calais border, leading to troubled scenes around Dover as continental lorry drivers were left stranded over the Christmas period. However, there was good news as well; the Pfizer vaccine rollout began in earnest through December, with the front-line workers and most vulnerable first in line. Furthermore, the AstraZeneca Oxford vaccine was approved on 30th December, paving the way for millions more inoculations from 4th January in the battle against the pandemic. And last, but by no means least, a Brexit deal was finally agreed and signed, concluding over four years of negotiations; now the UK look will look to rebuild a new prosperous future outside the European Union.
Market reaction through December…
Despite the mixed news through December, markets remained calm and were positive through the month, as the focus remained on 2021 post the pandemic crisis. Over the full month of December, the more cyclical centric FTSE 100 was up 3.1% and since 31st December 2019 the index remains down 14.4%. The more technology biased US S&P 500 index was up 3.7% over the month and up 16.3% since 31 December 2019.
Even Sterling was relatively calm considering the Brexit uncertainty through December, up 2.2% against the US Dollar and flat against the Euro over the course of the month. We believe that Sterling could further strengthen as we progress further into 2021 and the economy begins to open up without the Brexit trade deal uncertainty.
How we have been managing your portfolio through this recent period…
For the portfolios holding funds only, the investment team have been comfortable with the overall positioning coming into December. Thereby enabling the underlying fund managers to actively seek opportunities in their specialist markets and for the portfolios to benefit from the market rally.
For portfolios that also hold direct equities, the investment team have continued to actively manage your portfolio, positioning for the medium to long term. During December we purchased a FTSE 100 leader in global data and analytics solutions that we have identified as one of the ‘companies of tomorrow’ that is expected to be well positioned to benefit in the post Covid world. In addition, we bought a European industrial and consumer business specialising in industrial adhesives and consumer household goods, which is expected to be well placed for the 2021 recovery and beyond. In line with the environmental revolution that lies ahead, we also bought additional shares of a FTSE 100 energy infrastructure company with a clear renewables and sustainability plan at excellent pricing levels following a short period of volatility.
As the end of year risks with Covid and Brexit began to build, our short-term outlook began to turn less optimistic. Following such a strong run through direct equity portfolios as the value holdings rallied well through November and early December, we decided to take some profits out of a FTSE 100 broadcaster as initial price targets were met.
Current portfolio positioning and the outlook…
Having taken some profits out of portfolios in December, we come into 2021 with portfolios moderately overweight to risk assets and cash on the side lines. We continue to believe that over the medium to long term the equity allocation will outperform, however, there remains a possibility for markets to endure a short and sharp correction following such a strong run amidst ongoing negative Covid related news.
Any correction we see will provide the opportunity for us to buy some excellent investments that we believe will provide portfolios with strong medium to long term exposures. For portfolios that also hold direct equities, these opportunities are highly recognised global companies including: a luxury retailer, a video gaming specialist, as well as a broad technology investment trust, to name a few.
As we close out an extraordinary year on both the social and investment fronts, we are cautiously optimistic for 2021 and beyond. On the social side we believe that the war against Covid is close to being won through the multiple vaccines and therapeutics being developed and rolled out. On the investment front we believe that 2021 and beyond will present some excellent investment opportunities, as we embark on the much-anticipated journey towards normality and the positive effects that this is expected to have through markets. However, the markets have risen rapidly to date and the near-term risks remain at the forefront. As a result, we will continue to actively manage risk levels, as markets never move in a straight line.
We hope that you and your families have all kept safe and well through this period and thank you for staying the course with us through 2020. Performance has been encouraging considering the hurdles and we look forward to continuing to work at delivering for you through 2021 and beyond.
This update is for information only and does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it. The views and opinions within this document are those of Casterbridge Wealth at time of writing and may change without notice. They should not be viewed as indicating any guarantee of return from an investment managed by Casterbridge Wealth nor as advice of any nature. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.