April 2020

As I sat down at home to put some thoughts together in this Covid 19 climate, the issue of market performance, economics and returns may not be foremost in people’s minds. The health of the world’s nations and a return to normal life with real people centric values are far more important.

Our own firms work environment has changed drastically, with all staff working remotely. Zoom and team video calls are now normal daily events, with dress codes, kid interruptions and of course hair problems (me included) being part of the routine. Our fund manager providers are issuing daily updates on funds and market views, most necessary but sometimes overload springs to mind. However, let us take a quick look at some of the issues that have come to the fore this week.

PLANES TRAINS AND AUTOMOBILES:
I would recommend this John Candy movie in our lockdown times, but what really springs to mind is the price of crude oil. Going in negative territory is something never seen before. You could say that is was somewhat forced by the uniqueness of the end of the month (May) trading positions of most traders (storage and over supply), but most would agree that it is not just a simple technical trading position and more of an economic capacity issue. The worlds Air lines, general transport and manufacturing hugely reduced which would probably suggest that the recent bounce needs to be balanced with practical functional economic data. The world is taking a pause and the pumps are not pumping. A slight bounce has again happened today with our West Texas oil friends moving to $14 and Brent to $20. Perhaps due to Mr. Trumps latest views and intervention.

After participating in several webinars this week one of our fund managers and providers have highlighted 3 main issues (which are related) that will affect our economic progression in these times.

1. How deep will a recession be, its length and overall sectoral influences
2. GDP
3. Corporate profits in the up and coming quarters

There is a recommendation to focus on sectoral investment, with a heavier emphasis on Health and Tech as to a negative to Energy sectors. In summary, the view is one of long-term investment when there is value in equity investment. It is also interesting to note that CRH and Glanbia have withdrawn profits guidance this week due to the COVID 19 crisis

Aberdeen Standard CEO Keith Skeoch, advised last week that in his view the ‘Markets are passed the point of maximum panic’. We did see a strong bounce and bear market rally with a raise of 22%, but in general most sectors are down at least 20%.There may be a general consensus that we are at the cusp of the bear market to a correction point ?? Yet we are not past the peak of pessimism in all markets. Indeed, what the structural damage to companies over the next six months will illustrate where we may be going. Continued bad economic numbers and earnings will have to be dealt with.

Finally, as we all know bear markets return to bull markets. The issue here is the uncertainty and the unknown in this pandemic. It is easy to say that staying in the market is the best strategy but an individual’s ability to deal with all this volitivity is where it’s really at.

Keep safe and well. Mind your physical and mental health. Walk, run, dance (within 2km) and take care of each other. Once we do that, really, eventually, markets will take care of themselves.

Cheers

Ronan