As we endure yet another lockdown here in the UK, the outlook may appear rather bleak but the three main headwinds investors faced last year, namely the pandemic, the US election and Brexit are all diminishing as we look forward. The miraculous development of vaccines has boosted sentiment but the success of the rollout of these will be key to how quickly the global economy recovers this year. Monetary and fiscal support will help although one cannot rule out possible tax increases as the year progresses. The two key risks to equity and bond markets - a sharp rise in inflation and rising interest rates are, we feel, contained for now.
What is not in doubt however is the scale of the changes we have all experienced over the last 12 months are set to have a lasting impact. The speed at which disruptive technology is changing the way we now travel, work, consume and transact will result in new winners and losers in the corporate world. Those that have and will continue to adapt the quickest will succeed and, at the same time, successful companies of the future will need to demonstrate their purpose, what they contribute to society as well as their impact on the environment.
We still believe that equities offer good long term value to investors at the moment although, we must acknowledge, sentiment today seems somewhat elevated. We see the best opportunities within the UK, which has lagged global markets for the last four years and also within Asia, in particular, China. We are seeing more investible companies in China as well as some very well managed funds and will add more exposure during the year. Bonds offer little value still and so we remain underweight whilst we will continue to seek out more alternative investments to provide some ballast if market volatility returns.
As we look ahead, we will keep engaging with and supporting those companies that we have identified as providing the best possible future returns. Furthermore, we will always make adjustments to portfolios where necessary to capture the evolving trends, such as artificial intelligence, that have certainly accelerated over the last few years but not at the expense of holding our long term core investments.
Freddy Colquhoun, Investment Director
The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
