Quarterly Review

Ride it out, and watch for opportunities

David Wheildon / July 2020

The lockdown has been a nailbiting waiting game for many businesses, families and individuals, even as markets have consolidated or even seen growth in places. Entering the uncertainty of opening up life and work again may be a whole new region of uncharted territory, but our principles of wise investment management remain steady, says David Wheildon.

The summer of 2020 continues to be dominated by Coronavirus and the impact it is having on all our lives. After the introduction of the lockdown, to help manage the flow of serious cases through the NHS, our Government’s focus has now moved to restarting the economy with the easing of lockdown conditions.

Although Governments in every country are taking matters at their own pace it’s clear that the desire is to encourage a return to economic progress. This is not to say that we are being encouraged to ignore coronavirus – far from it – rather we are being encouraged to live as normal a life as possible whilst remaining alert to the presence of the disease. For the majority of us this means using our common sense by maintaining an appropriate social distance and avoiding high risk practises such as cramming ourselves onto Bournemouth beach or in the narrow streets of Soho. With the uncertainty over the development of a successful vaccine for the virus we are likely to be living in these conditions for some months to come.

 

ADAPT AND INNOVATE

 

The easing of the lockdown conditions has allowed many businesses to reopen, even if a great number of these can only do so partially. Having found a way to operate in the coronavirus world and opened their doors this is in no way a guarantee that consumers will automatically return. It will take time for consumer confidence to reappear and in a number of sectors this may not happen quickly enough to save some of those businesses concerned.

Within our individual parameters of safety and comfort we are each being encouraged to return to our previous spending habits, but this is proving to be easier suggested than done. It was true of the dinosaurs and it is true of all businesses that to survive you must always adapt – and despite the incredibly short time this virus has been with us, its effects are already shaping the way many businesses operate.

It is perhaps not too strong a comment to suggest that one of the effects of the virus is to dramatically accelerate the way technology is being used by businesses and the way they interact with consumers. It could well be that technological changes that may have taken a generation to come through are now likely to arrive in the coming years. For many, the mention of Zoom reminds us of an iced lolly enjoyed in the summer months, but now it refers to a video conferencing tool used by businesses and families alike. This is only the beginning and there will be further and greater revelations in technological communication as each quarter passes.

The impact of the changes brought about through the effects of the virus are most definitely mixed, with some serious winners along with the perhaps more obvious losers. The owner of Amazon has seen his personal wealth increase by billions of dollars and the value of other technology firms and online retailers has also boomed. As we all adapt our own social and commercial lives to settle on a way of living determined by the presence of coronavirus, those firms which offer us solutions will thrive.

This economic new vs old dichotomy reminds us of the times around the 1999 dot-com surge. Many of the commercial predictions at that time were already beginning to come true (admittedly 20 years later) and now a number will accelerate to fruition.

 

MONITOR AND WATCH

 

As we as individuals and those businesses we interact with adapt, there is and will continue to be volatility in the investment world and this is reflected in the current market movements. There has been a healthy rebound since the falls in early March such that many holdings are now in profit over the last year or so. However, we are now moving into a time when uncertainty prevails as the shakedown of economic winners and losers continues.

The fund managers are very focused on their stock picking skills and we are monitoring them closely; so far they are succeeding in identifying assets with potential and avoiding those with pitfalls. We do expect them to generate positive returns over the coming months but the volatility we see today is also likely to last. Without wishing to repeat last quarter’s review, it is still a case of keep going and ride out the current turbulent times – success will follow in due course.

This article is the opinion of David Wheildon