What has happened over the last 3 months…
Finally! Having passed the 23rd of March anniversary of the first UK lockdown, we are nearing a return to normality as vaccines roll out and the Government has laid out plans for the gradual reopening. However, at the start of the year, having bade farewell to the tumults of 2020, dark clouds remained on the horizon for fears of a renewed Covid case spike and seemingly endless lockdown. As January rolled on, the Covid trends sharply reversed in the UK and the US as the vaccine roll out beat initial expectations for speed and efficiency. The same could not be said for Europe which continues to flounder. At the time of writing, whilst there remain concerns for the various Covid strains emerging around the world and the potential for a third wave later in the year, it is believed that the vaccines should still provide protection. As we edge closer towards the reopening and return to normality, the world’s front pages have noticeably been dominated with non-Covid headlines; perhaps signallingthat Covid might really be in the ‘rear view mirror’.
Market reaction over the last 3 months…
At the start of the year stock markets had initially reacted positively to the reality of global economies reopening amid the vaccine rollout. However, early in March, investor attention quickly turned to the fears of inflation, largely stoked by the government spending and ultra-accommodative monetary policy. This was a short sharp sell off as the market has recently calmed and has already started to slowly recover. Over the quarter, the FTSE 100 was up 3.92% and over 12 months, the index was up 18.36%. In Sterling terms, the more technology and growth biased US S&P 500 index was up 4.88% over the quarter, and up 38.34% over 12 months.
Where are we now…
As we look ahead through the rest of 2021, there remains hope that the global economic reopening will evolve over the next few months, leading to increased demand for all those activities that we have been denied over the last year. The likelihood for company earnings in certain sectors to be stronger has been growing, which has begun to be reflected in the share prices of those ‘value holdings’. With this backdrop, GDP growth is expected to strengthen on the recovery, ushering in a period of positivity for the markets.
However, we are also looking out for the potential pitfalls that could cause some ‘slip ups’ for the recovery further down the line. One of those concerns is the feared return of inflation as the global economy begins to re-open with the enormous fiscal stimulus in the background and the very loose monetary policy. We are also keeping a close eye on the Global Covid infection rates, hospitalisations and mortality numbers, given a resurgence could derail the reopening, despite the global efforts with the vaccination rollout.
How we have been managing bespoke portfolios through this recent period…
Through the first three months of 2021, the Bespoke investment team have taken the opportunities to increase the exposure to those ‘Companies of Tomorrow’ that are poised to blossom in the years ahead.
At the start of the year, we had identified some concerns for the stock market and decided that it would be prudent to bolster some of the more defensive assets through the purchase of UK and US Government Bonds, to protect in the event of a resurgence of Covid related issues and falling stock markets. In addition, we purchased an allocation to gold as long-term insurance against the potential for future inflation.
As the Covid picture showed signs of a dramatic improvement, we were presented with excellent opportunities to begin to make investments into some of our long sought-after exposures. Purchases made included, a global payments company, a surgical robotics firm, shares in a consumer household name with strong brands, a company that provides innovative technology to the automotive sector, we also bought shares of the largest online food delivery company in the world (outside China), as well as a video game services company which has the pick and shovel technology expertise to the industry. Finally, we also purchased a technology fund that has exposure to some of the most recognised global technology names together with some very exciting up and coming names.
Current portfolio positioning and the outlook…
At the time of writing, bespoke portfolios are back to being slightly overweight to equities as we have taken advantage of the recent market falls. Whilst we continue to believe that over the medium to long term, the equity allocation will out perform, we will be keeping an eye on the upper limits of our equity allocations to ensure we are not overly exposed. As the recovery takes hold, we shall be continuing to rotate out of the value holdings at the right price.
Looking ahead we continue to hold cash ready to be invested into some excellent opportunities that need to hit our entry price targets before we make the purchases. These are global companies including: a luxury retailer and an energy related solutions company, to name a couple.
What have we been doing for clients in our Managed Portfolios…
For clients who are invested in our Casterbridge Hardy and Sustainable Impact portfolios, we also took a slightly more defensive stance at the beginning of the year. We raised cash levels to provide us with greater flexibility to look for new opportunities. New holdings have been identified and we expect to invest much of the cash over the next month or so, predominantly into equities, as this is where we see the most exciting growth opportunities over the coming years.
Final thoughts…
The start of 2021 has proven to be bumpy for global stock markets, however, the direction of travel certainly seems to be positive as we begin the journey towards normality. It is important nevertheless, that as investors, we remain humble and understanding of the potential risks that lie ahead. Markets do not travel in a straight line and it is through our active management that we will keep the portfolios on track for the medium to long term.
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.
