As summer emerges, despite new variants, will our confidence emerge with it?

What has happened through June…

Warmer temperatures have finally arrived after a rain sodden and cold spring. Along with the emergence of summer, we lift our weary heads after a winter in lockdown, as finally the pubs, restaurants and shops have re-opened their doors. However, despite the strong vaccine drive, the ‘Delta Variant’ has taken hold and forced the government to delay the full liberation day to later in July. Foreign holidays are all but cancelled as vacation hopefuls play roulette with the green, amber and red country list. The British Isles have likely never seen a summer season quite like it with demand soaring for hotel space across the country; on the bright side, this is expected to be positive for the UK economy.

Market reaction through June…

June has been positive for equities with a few bumps along the way as markets continued to assess the threat of inflation amidst the reopening of the global economy and the threat of new COVID variants to derail the progress. Over the month of June, the FTSE 100 was up 0.21% and over 12 months, the index was up 14.07%. In Sterling terms, the more technology and growth biased US S&P 500 index was up 4.80% over the month to 30 June 2021, and up 23.38% over 12 months.

Where are we now…

As we look ahead through the rest of 2021, there is continued confidence that the global economic reopening will happen despite the emergence of new variants, given that vaccines have so far been proven to provide sufficient protection. Inflation is on the rise as demand continues to outstrip supply; however, for now Central Banks remain calm, given their belief that these inflationary pressures are temporary, as supply chains are repaired, and conveyor belts crank up supply over the coming months.

How we have been managing bespoke portfolios through this recent period…

Through the last few months, the Bespoke investment team have taken the opportunity to increase the exposure to those companies that are poised to flourish through the economic reopening and well beyond.

We took advantage of the market volatility, buying into some well-known companies that we had been tracking awaiting our purchase price targets to be met. To highlight a few of these purchases, we bought into a game publishing company with a global reach, that we expect will thrive for many years to come as its highly popular games tap into the theme of gaming as the new social media platform. We also bought shares in a luxury goods company, providing exposure to the resurgent consumer across the world who is seemingly more prepared to buy top quality products than ever before.

In addition, we also took the opportunity to make sales of those companies that had reached our price targets enabling us to reinvest the proceeds into those companies where we believe there are stronger long-term prospects. These included the sale of a global athletic and sports company as concerns grew of collapsing sales in China. We also sold out of a French cosmetics company following a strong run in the share price which we believe left the shares at expensive levels.

Current portfolio positioning and the outlook…

At the time of writing, bespoke portfolios remain slightly overweight to equities as we have taken advantage of the recent market falls. We continue to believe that over the medium to long term, the equity allocation will outperform, however, we will be keeping an eye on the upper limits of our equity allocations to ensure we are not overly exposed. As the recovery continues, we shall be continuing to rotate out of the value holdings as and when our price targets are met.

Looking ahead we continue to monitor some excellent opportunities that we believe will provide portfolios with strong medium to long term exposures; these include a precious metals mining company, a global financial markets infrastructure provider and a global digital industrial company.

What have we been doing for clients in our Managed Portfolios…

Within our Hardy Managed Portfolios, the changes we made in March to tilt the portfolios towards more cyclical / value funds, particularly within UK equities, proved timely. These funds, with a focus towards Mining and Financials, have continued to outperform the broader market as inflation expectations have increased. We have made further small similar changes at the end of June, nudging up exposure to UK equities further; in addition, we have introduced a new Alternative fund, which aims to produce positive returns but with lower volatility than the broader markets.

Final thoughts…

We continue to believe that the equity markets have further to run despite the strong performance since the lows of March 2020 given the ongoing support from governments and central banks. However, we are mindful of the fact that the situation can change swiftly and as such we continue to run portfolios in a diversified manner with fixed income and alternative exposures to provide the necessary support during potential market corrections that may lie ahead. These corrections we view as necessary for healthy stock markets as it provides investors time to pause and reengage with fundamentals.

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.