What a year it has been since taking over the business! It has been described as a “baptism of fire”. It would be an understatement to say last year posed a unique challenge; however, throughout 2020 we made significant changes to the business in the face of some uncertain times. Thank you to the team for their efforts in implementing them efficiently and to all our clients for their patience and understanding, particularly given the unprecedented market volatility we experienced in the first half of the year.
Throughout this year we will be continuing to make enhancements to ensure that our systems and processes operate in a seamless manner to meet the ever-changing needs of both regulatory requirements and client expectations. The one part of the business which will always remain unchanged is our personal service and values which will always be at the forefront of everything we do.
As a business, we have been working remotely for some time in order to keep both staff and clients safe. This will remain in place until the Government guidelines change and we, as a business, feel comfortable with the precautionary measures we have taken. Thankfully, the system changes that were implemented in August last year are working well and we are able to maintain client services without disruption. We look forward to the time when face to face meetings can resume and we can welcome clients into the office again.
It is often said that markets hate uncertainty but is that true? Well not really, it is investors rather than markets that fear uncertainty, which is why so many have shunned the UK market since the UK voted to leave the EU and negotiations over the full terms of our exit have taken so long to finalise. Now that some of the uncertainty has been removed, there is hope that as our new relationship with the EU develops, investors will start to return, and the UK market will begin to return to favour. However, it should be remembered that the trade deal agreed with the EU does not extend to services, which represent a large part of the UK economy, and in particular, financial services. As a result, there is likely to be a further period of wrangling with the EU over how services will be delivered, so it is not going to be all plain sailing for the UK in the year ahead.
But before we start to look forward, let us reflect on the events of last year. For most, 2020 will be remembered as the year when the Coronavirus pandemic crippled the UK, but investors might also reflect on the fact that it included the shortest bear market of all time! The year began on a fairly quiet note with global markets making modest progress during the first six weeks. However, in the UK, the euphoria that followed the landslide Conservative victory in the snap General Election called by Boris Johnson was replaced by renewed uncertainty over Brexit. Although the terms of the UK’s withdrawal from the EU had been agreed in the previous September, the terms of a trade deal were still to be agreed and investors were fearful that this might prove an impossibility. As a result, the UK market continued its underperformance of other major markets.
When it became clear that the Covid-19 outbreak was more serious than originally thought, share prices fell sharply and continued to fall as countries went into lockdown. However, they gradually recovered with the vast majority of markets getting back to the levels seen at the beginning of the year by the middle of July, thanks largely to the huge sums of money printed by central banks. The only exception was the UK which continued to be dogged by uncertainty over the EU trade deal negotiations. It also suffered more than most as a result of the fact that our market has a higher proportion of companies in those sectors that have been hardest hit by the pandemic, such as financials and oil producers, than other markets. In addition, it has a smaller proportion of technology companies as the vast majority of the UK’s have been acquired by foreign companies.
Apart from the UK, which closed down by a little under 10% in terms of the FTSE All Share Index, all major markets made progress in 2020 with many showing double digit gains. Asia proved the star performer with a gain of more than 20% thanks to the strong economic recovery in China following the Coronavirus outbreak.
The US Presidential Election in November proved a welcome distraction and Joe Biden’s victory was well received by markets. To what extent the new administration will be able to deliver the promised stimulus to the US economy remains to be seen but the election result is unlikely to change the Federal Reserve’s determination to provide the necessary liquidity support for the economy and capital markets.
With the first Covid-19 vaccine starting to be rolled out in December followed by a second in the first few days of 202, there is hope that an end to the Coronavirus pandemic is in sight. The discovery of new variants of the virus, which are considerably more transmissible than the original, is causing concern that the next few months could be a difficult period for markets.
As vaccines become more widely available, global economic growth is expected to pick up strongly with private sector economists forecasting GDP growth of 5.4% in UK, with the Bank of England suggesting that it could be as much as 7.25%.
Against this background, we are optimistic about the prospects for the major equity markets and expect to see good progress being made in the year ahead.
As always if you have any queries or concerns regarding your portfolio then please do contact us. Whilst we are working remotely, we are always contactable and will do our utmost to ease any concerns you may have. We appreciate this is a very challenging time for everyone, if we can help within our capacity then please do not be afraid to ask.