Monthly Investment Briefing
Despite market jitters, are there reasons to remain positive?

What has happened over the last month…

The transition from summer to autumn can typically be a more volatile period for global markets and the close of September certainly saw some market jitters. The final week of this month has been fraught with concerns as broken supply chains in the UK, due to a shortage of HGV drivers has led to nationwide panic buying of fuel. There has also been the significant price rise for Natural Gas as a confluence of events have pushed the prices to a seven-year high, as the strong growth in reopening demand has clashed with a significant reduction in wind powered energy and Russia’s exports below the normal levels.  The prospect of sharply higher energy prices ahead of the winter months and ongoing supply chain issues have renewed concerns for inflation and consumer purchasing power.

However, regardless of the short-term concerns, there remain reasons to be positive given ongoing monetary and fiscal policy support, Covid vaccinations whilst not 100% perfect…do work, the talk of national lockdowns has all but disappeared…for now, businesses have been resilient, and the consumer has been spending. So far investors have taken any market pull back as an opportunity to invest, thus preventing a proper market correction of 10% to 15%. Time will tell if this continues through the final quarter of 2021.

Market reaction over the Month of September…

For the month of September 2021, the FTSE 100 was down -0.47% and over 12 months, the index was up 20.8%. In Sterling terms, the more technology and growth biased US S&P 500 index was down -2.39% over the month of September 2021, and up 22.75% over 12 months.

How we have been managing bespoke portfolios through September…

During the month we sold one of the utility companies out of portfolios on valuation grounds as the shares have performed very well, exceeding our fundamental price levels. We also took advantage of some of the volatility during the month using a portion of the cash to add to some existing holdings that were trading at attractive levels for the medium to long term. These included the US listed video game publishing exposure, whose long-term fundamentals remain strong given the gaming as the new social media trend. We also added to the mining exposure as a strong long-term investment in the global infrastructure trend which is set to grow over the coming decade. We added to the luxury consumer company on recent weakness resulting from China concerns, despite the strong potential as the global economy reopens. Finally, we added to one of the telecoms holdings given its improving outlook and the shares being undervalued.

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 to add to some existing holdings at lower prices. However, we come into the final quarter of the year with an elevated allocation to cash. We believe we are therefore in a strong position to participate on the upside; however, we are extremely well placed to take advantage of the expected volatility over the next few months, at which time we shall reinvest the cash into the markets at much improved valuations.

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 global financial giant with a broad set of business lines and strong management, the choice of some leading industrial companies that are expected to see improved business conditions ahead. In addition, we are looking closely at several US listed private debt companies, that will be well positioned to weather the potential period of rising interest rates.

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

Within our Hardy Managed Portfolios, we have continued to nudge our portfolios away from some of the highly rated large technology companies and towards more cyclical and small mid-sized companies, both in the US and UK, which we expect will benefit most from the continued global recovery over the coming quarters. In the US this involved the sale of two funds and the purchase of two new funds. In addition, we have invested cash to purchase a new multi-asset absolute return fund, which we expect to produce positive returns with low volatility. Even though this equity bull market has run a long way, there are always new and exciting opportunities, and this is where we are spending much of our time.

Final thoughts…

The markets have staged a stronger comeback than could have been expected back in March 2020 during the Pandemic market lows. As so much of the good news has been digested through 2021 to date, the markets over the short term may have got a little ahead of itself. Our ability to be agile and proactive has seen us take some profits in favour of cash, awaiting a market pull back for the reinvestment. Portfolios are therefore in an excellent position to benefit from any upcoming market downturn. It is through this active approach that we can make a significant difference in the context of the medium to long term view, as we strive to hold the very best companies with which to express our long-term thematic views.

 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.