We wish you extremely belated best wishes for the New Year. We are not immune to the pressures of lockdown III but we continue to be stalwart in our professional work whilst making an effort to keep healthy in our personal lives. Our Head of Operations and soon to be Managing Director Matthew Cheek has organised weekly Yoga sessions for his colleagues and any clients/IFA partners that would like to join us. I have attended the sessions, often with a little voice encouraging me to stay on the sofa; but the positive feeling you get from the simple act of exercise is so valuable. I strongly recommend it. We are all in lockdown, again, but the rate of inoculation in the UK is something we should take pride in. Family members of our team are involved in the frontline activity of delivering the vaccine and we’re very proud of their efforts, and the efforts of all the NHS and other staff. We know there will be clients and professional colleagues that will be affected by this awful virus, my daughter contracted COVID over Christmas and we have friends and colleagues that have family affected by this terrible disease and our thoughts are with them. There is an incremental improvement in hospitalisations and a hope that everyone over 50 will be offered a jab by the end of spring and we might return to the rule of Six at least by the beginning of summer; with Autumn the back-stop for a return to ‘normal’. We all hope things will improve more swiftly but we must ere on the side of caution.
We take a similar attitude to our shorter term investment perspective, having seen strong recovery in the last quarter of 2020 we have taken some risk off the table. Longer term we remain strongly committed to equity investment, particularly in Emerging Markets and the US. Our ‘House View’ has been to be at the top of our equity exposure for each risk profile, driven by the strong performance last year. We met, as an investment team, earlier this month and felt the price of stocks and the exuberance was overdone- so we have sold down some of our equity exposure bringing us to the centre line of risk. We still strongly believe that the ‘Fourth Industrial’ revolution of technology including Robotics, Artificial Intelligence, Renewable Energy and Data driven service will be supported by global central government spending and continued low interest rates so far into the future that it is not sensible to plan for a change. However, if you spend and maintain low interest rates then inflation should return, so we have included a purchase of gold in bespoke portfolios this month which is a long term asset allocation. We have also added to our investment government bonds both UK and the US, they should provide some protection against a short term fall in company values. We haven’t reduced risk further because the eventual waning of the virus, the continued stimulus and a pent up demand in the consumer means the ‘Roaring 20s’ is an opportunity on the upside that could turn up earlier than expected.
In the event of a healthy pull back in traditional risk asset values you will see us pick up technology, luxury goods, online retail holdings we have been watching for some time, our patience is being rewarded as the British Pound has appreciated since the Brexit deal was signed and is now at $1:37 versus the dollar. If sterling breaks through this level it could enter a new stable trading range of $1:37 to $1:47. The majority of our targets are overseas as the sectors that dominate UK markets include Energy and Financials which we hold on a ‘Value’ basis but are looking to reduce our exposure to as recovery is fully expressed through 2021. We are looking to find liquid exposure to Block Chain, Rare Earth mining/utilisation alongside further Infrastructure and renewable/new energy holdings.
We have been watching the leveraged investment arena both the hedge funds and the retail REDDIT driven flash mob investment scheme. Individual online investors have been able to put $1,000 into an online dealing account and then invest that within options in a way that allows them to be exposed to the investment as if it was $5,000- which is great when the ‘bets’ pay off but in the event of a reversal of fortunes means they lose their money five times as quickly. This has led to headline grabbing losses for one particular hedge fund in New York, and some profit has gone to small retail investors – via the aptly named Robin Hood- but I suspect for every positive story there will be someone investing in a way they can’t afford and perhaps don’t understand the risk they are running. US investment houses offering options have started requiring 100% margin rather than the 20% (which allows the five times leverage), they would only do that if they, as an institution have lost money, retail clients have lost money inappropriately and the regulator is concerned as to the suitability of those investments. In my experience if there is a way for banks to make money out of private individuals they will allow it, they’re not interested in a closed shop, because closed shops don’t make money, as in Lockdown has sadly been the case. We look upon the retail investor exuberance as another sign of overcooked market sentiment, supporting our short term reduction in risk. Let’s hope for a positive spring both personally and professionally and if you would like to discuss any of the above please don’t hesitate to contact us.
Important Information
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.
