| THE WIDENING ECONOMIC & INVESTMENT MARKET GAP
Is the Gap narrowing or widening between the investment markets (Wall Street) and the real economy (Main Street)? You will no doubt be aware of the ‘GAP’ between the investment markets and the real economy from the communication we have been providing, along with substantial coverage in the financial media. It is important to remember that equity markets are forward looking and economic data is based in the present. For a number of weeks the ‘disconnect’ has been a focus for market commentators (and remains as such) – so like a faulty watch, there will be a point in time where a correction develops regardless of the medical outcome of Covid-19, but how deep and protracted any dips are is subject to guess work. Investing should not rely on guess work, the construction of an investment portfolio should (and must in regulatory advisory sense) be constructed based upon the Risk Tolerance, goals and aims and Risk Capacity of the investor. We, Best Price Financial Services (BPFS), are firm advocates of investors holding suitable (risk adjusted) portfolios so the risk/reward position of a portfolio can be understood. We all know that predicting investment market outcomes is impossible so obtaining the correct mixture of assets is essential. We continually (when reviewing potentially new client’s portfolios), see a woeful asset construction – and often completely out of kilter with an investor’s understanding of how they are positioned?. Often we review portfolios from restricted advisers who are tied to a distribution channel – where some of the investment advice we have seen has been scarry (a number of investors understood that their investments were medium risk when they were holding 80%+ in equities). We can expect a number of ‘Investment Market Shocks’ to appear – without a medical intervention to Covid-19 and therefore the quality of how an investor’s overall portfolio is constructed is absolutely essential. Economic Reality
The economy ‘was’ in great shape – with the ‘puzzle’ fitting together nicely prior to the pandemic. The ‘puzzle’ has been scattered and will take time to rebuilt. Economists expect the economy to display the true depths of the destruction in the months to come (assuming the world is on track for recovery). The investment markets have ‘bounced’ to this point due to the stimulus and financial support by governments never previously witnessed. Take a read of the blog published on 29 April 2020 – ‘An Investment Market Overview’ – to read more about ‘What we know’: You may also find some benefit in re-reading the blog published on 30 April 2020 – Investment Market Direction – has the bottom of the market already concluded? : https://www.bestpricefs.co.uk/blog/investment-market-direction-has-the-bottom-of-the-market-already-concluded A clear example of Wall Street/Main Street Disconnect
Jim Crammer of CNBC’s Squawk Box can be seen in a confused state….. Crammer is renowned for his animation but if you have been an avid watcher you will understand his distress. Businesses that had forecast a strong first quarter have been decimated while needing to care for employees and customers. Jim (Crammer) has talked extensively about investing in Global/Iconic Brands, healthcare and Tech. There is a ‘NEED’ like never before to understand what is held within a fund/portfolio and the value of buying ‘index funds’ is now questioned more than ever before. This environment is a stock picker’s dream – being able to research the data and ‘get under the bonnet’ of each investment to assess the worthiness of inclusion within a portfolio. Investors must note that a short term turn around to the economy and investment markets is unlikely so being best positioned for the future is absolutely imperative. Blending Assets and products – to target income. We know that the extent of the Dividend cut to previously predictable Dividend issuers has been massive so the search for ‘income’ progresses. ‘Income by contract’ becomes a focus. We will be providing information on anticipated exceptional terms very soon. Watch this space…… We have also been asked to explain further how ‘Barrier Protection’ in relation to Structured Products work – in a simple way. Again, watch this space for the launch of a 30% barrier – allowing for a fall in the relative index of up to 70% at the end of the 10 year maturity. Deep defensive I hear you say? As always, get in touch if you require Independent Financial Advice. Continue to stay healthy. Very Best Wishes. Richard and Best Price FS Team |
