Getting Ready For Round 2

It was almost inevitable, but we are now dealing with ‘lockdown’ round 2. Just as things were beginning to return to some vague kind of normality, the virus has staged its resurgence and more restrictive measures are being introduced.

The Importance of Data

It can’t be underestimated how important good data is. In the age of fake news, social media feeds and media speculation, it can be hard to know what to believe, but good, accurate data, can make it easier to see through the noise.

You will have to excuse the rather tenuous link here, but two things this week have made me reflect on the importance of data.

A Message From Matt – 29th June 2020

As it becomes clear that Coronavirus is not going away any time soon, we move from the initial panic phase of the crisis into the management and maintenance phase.

If we accept that the Coronavirus pandemic is going to be a marathon and not a sprint, you could use the analogy that we have started a little too fast, running the first 5 miles in record time, but that might come back to bite us later as we struggle to settle into a more consistent pace for the rest of what is still a very long race ahead.

Your Post-Lockdown Life

As we enter the month of June, we find ourselves in an interesting dichotomy.

The UK is beginning to relax lockdown measures as other countries are having to reimpose them, given that they are seeing a resurgence in the virus.

A Message From Matt – 7th May 2020

So, it seems that this weekend will see at least some, subtle relaxation of the current lockdown measures and Boris Johnson’s announcement on Sunday will signal the start of the slow and gradual return to our ‘new normal’ – whatever that means.

I wanted to share some thoughts about what that might mean for markets and for us as a business.

Markets seem to have been fairly resilient thus far given the scale of the crisis we are dealing with. Investors who held their nerve early on in the crisis have now been rewarded with a significant recovery in investment values, although markets clearly still have a way to go to reach their previous highs.

The markets seem to be buoyed by the gradual lifting of restrictions across the world and let’s hope that this process can continue without causing a ‘second spike’ in cases.

I imagine this recovery will be one of winners and losers as different sectors of the economy get back to normal at a different pace. Of course some businesses are thriving in this environment and these companies generally won’t receive the same level of press attention compared to those who are sadly struggling, but just remember that they are out there, quietly working away, getting the economy back on its feet.

On the business front, negotiations are ongoing on our new office space and we have every intention of returning to the central London hub we love so much, as soon as it is safe and viable to do so.

With this said, we will be in no immediate rush given how well our current operation is working and so we will most likely adopt a ‘wait and see’ approach once restrictions are lifted and we will take client feedback into account to determine the timing of the full reopening of the office.

What the last few months have shown us is how generally successful online meetings can be and we will certainly retain this as an option for people who are not comfortable travelling into London in the first instance or for those who simply wish to save themselves a trip. We have also found that video conferencing is a great way to connect with clients to discuss those ‘ad hoc’ issues where there is some benefit in a face-to-face meeting, but perhaps which don’t justify a trip into London.

In the interim, we may also offer home visits as an alternative to a meeting in the office for a limited period where this is the preferred option.

I am delighted to report that Buckingham Gate has enjoyed a very good start to the year and I consider myself extremely lucky to be running a business that can operate relatively normally under these circumstances. I am incredibly proud of how the team have adapted to their new working environment and I am pleased to report that everyone is safe and well.

Finally, I am grateful for the way that you, our clients have responded to the current situation. We have received many messages of thanks for the support that the team have been providing to clients during this challenging time and these are gratefully received and appreciated.

As always, if you need any support, please do not hesitate to contact us.

A Message From Matt Smith – 9th April 2020

As we head into the long Easter weekend, I wanted to provide you with a further update on the markets and provide some more of my views on the future.

Many articles I have been reading recently have been talking about the ‘new normal’. Despite how quickly us human beings adapt to new situations, I am a little concerned that we are referring to this current state of affairs as ‘normal’.

I do believe that there will be a ‘new normal’ after the worst of the virus is behind us, but I certainly hope that this is not it.

However it is interesting to note just how comfortable we have become with our new way of living after just a few weeks. After the initial panic and pandemonium, we tend to calm down very quickly, rationalise what’s going on and then deal with the problem and begin implementing solutions. It is easy to see this phenomenon in action across all sorts of different business sectors and industries.

In our own business, we have transitioned the entire team to a home working environment, pivoted our usual monthly seminar programme online, presented to over 600 people and implemented new estate planning solutions via video link and phone calls, all in the last 3 weeks. I never could have imagined how quickly all of this could have been achieved, but necessity is a powerful thing.

I take great comfort from this. The fact that we can build a 500-bed hospital in the Excel Centre in 9 days, the fact that the Mercedes Formula 1 Team can build 1000 assisted breathing devices in a day and the fact that we can come together and applaud our NHS heroes at 8pm on a weekly basis just shows what is really possible when we strip away our self-imposed bureaucracy and red tape and just focus on the task at hand.

I am also pleased to report that we do seem to be seeing some tentative signs that the market is calming down slightly. I’m sure there will be some more surprises to come, but the markets have been a little bit less choppy this week and let’s hope that continues.

I wanted to end on a positive note and share a video with you that touched me a few days back. These times are undoubtedly tough, but there are positives to be taken out of all of this as well. I will leave you with this short clip to hopefully lift your spirits as we go into the long weekend: #WeRemember

Comfort Reading For Uncomfortable Times

We are currently living through some interesting and unprecedented times and it can be difficult to gain perspective when we are in the middle of a crisis.

We have curated some articles and resources below that should allow for a more rational view of current events and this content will hopefully provide some reassurance for those of us who are struggling with the daily news feed at the moment.

Curated Resources

1. S&P 500 Crash Recovery Timings

This document shows the performance of the S&P 500 since 1926 and, most importantly, the relative length of ‘bull’ (positive) and ‘bear’ (negative) markets. The good news is that bull markets tend to last much longer and generate much greater returns when compared to the relatively short-lived bear markets. To support this, you can also download our very own ‘How The Market Works’ document here.

2. FTSE All Share Crash Recovery Timings

The theme here is the same as above. The key thing to note here is the shaded areas, which show the times of crisis or recession. Note how the stock market recovery often starts while the crisis is in full swing. For example, the 2nd World War lasted from 1939 to 1945, but the stock market recovery began in the middle of 1940 – almost 5 years before the end of the war. This same pattern can also be observed during the financial crisis in 2008/09.

3. Fidelity document on missing the best days in the market.

We have shared this document many times before, but the message holds true. If you miss the best few days in the market, even over a long period, you significantly damage your total returns. If we look back 15 years from now, it’s not hard to imagine many of the best days being in 2020 given the volatility of the market.

In fact, yesterday (24th March 2020) is now on record as the 2nd best day in the history of the FTSE 100. This just goes to show that the best days often come on the back of the worst.

Curated Articles

We have summarised some of the best new (and old) articles about investing in times of crisis.

Stock Market performance in previous outbreaks

50 Previous ‘Crash’ Events that the market has ignored

We Will Get Through This

The Market Always Goes Up

Recommended Reading

If you are looking for something more substantial to fill a day at home, we would strongly recommend the following book:

Factfulness – By Hans Rosling

We have suggested this before, but this has to be our number one recommendation for those wanting to gain perspective on seemingly extreme events and the way that the media report on them. An essential read for every human being on the planet.

The Financial Conduct Authority does not regulate Estate Planning, Tax Planning, Will Writing, Trust Advice, or some elements of Automatic Enrolment.
This communication is for general information only and is not intended to be individual advice. It represents our understanding of Law and HM Revenue & Customs’ practice. You are recommended to seek competent professional advice before taking any action.

Please note that investments can fall as well as rise and any income generated by an investment can fluctuate over time.

Matthew Smith’s Thoughts on The Pandemic – 20th March 2020

As we begin to come to terms with our new way of life, many clients have been asking me for my personal views and opinions on the current situation and where I think things will go from here. As such, this is a collection of personal thoughts on all sorts of issues which I hope you will find comforting and reassuring at what is clearly a difficult time for everyone.

The Current Situation

As I write, the markets are in turmoil, most people are working from home and we are panic buying and stockpiling loo rolls. I do appreciate the severity of the situation, however some of these moves (I saw a chap at Tesco a few days ago purchasing at least 200 loo rolls) are being overdone and overblown, in some cases to epic proportions. I have the same feelings about the market reaction which I will come onto in a moment.

I believe we are fast approaching the point of ‘peak panic’ (although we are not quite there yet). In the coming day or two the schools will close and I strongly suspect that we will enter a period of enforced lockdown, much like we have across Europe. Once these measures have been announced I suspect the panic and irrationality will have one last hurrah and then, slowly, gradually, we can begin to rationalise and come to terms with our ‘new normal’.

It is said that stock markets climb the stairs and take the lift down and I feel the same will be true of our feelings and reactions to this current crisis. At the moment, things feel very new and the change is unnerving. But, over time, we will get used to the new way of working for a time and gradually things will return to normal (it is just that we don’t know exactly when that will be).

The gradual return to normality will receive little media attention and we won’t feel it nearly as strongly as the painful changes we are making to everyday life now, but, slowly and surely, it will happen.

Human emotion is strong. We are not always rational creatures, especially when faced with a threat to our health and the desire to feel like we are ‘doing something’ is great. We have to remember that the people who trade billions of dollars on the global markets are human beings too and will suffer from all of the same fears as the rest of us and this will no doubt impact on their decision making (whether they realise it or not).

The Virus

As as starter for 10, I am not an epidemiologist and I do not have any scientific qualifications of any kind, so my views on the issue of the virus are very much from a layman’s perspective.

The health issues caused by the virus are heart breaking and there have been some harrowing scenes playing out on the evening news. We have to remember that these are a minority of cases, however that does not make it any easier to watch. My thoughts are with anyone personally impacted by this situation.

In order to see ‘light at the end of the tunnel’, in my view, one of two things will need to happen:

A – We develop and deploy a vaccine.

B – We develop so called ‘herd immunity’.

In reality, I suspect that it will be a combination of both of these factors that sees the end to this crisis and both will probably happen sooner than we expect (disasters always feel like they will take a lifetime looking forward, but usually seem to pass more quickly in retrospect). There is news today in the papers that the progress of the vaccine is gathering pace and that it could be ready in months and not years. Early days yet, but a green shoot of hope and I certainly have my fingers crossed.

As an eternal optimist and as an entrepreneur, I have every faith that we will get through this crisis and return our lives to ‘normal’ before long. I suspect that ‘normal’ might look a little different at the end of all this, but not that different.

The Market

By now we are all aware that the markets have had a rough few weeks. To think that we were sitting at record highs barely 3 weeks ago is almost unbelievable. The speed with which markets have fallen is unprecedented and, I believe, is more to do with human emotion around the health crisis than anything fundamental.

There will no doubt be an economic impact of this crisis and there will be a hangover, just like in the financial crisis of 2008. This will be one of those watershed events that will be remembered and spoken about for years to come.

Despite the panic, I do personally believe that the sell off has been overdone (based on the facts and data we have available now). A great example of market irrationality is the Amazon share price. Arguably one of the companies who are best placed to do well in this brave new world, Amazon are in the process of hiring 100,000 new workers globally to meet never-before-seen demand. Why then is their share price down circa 12% over the past few days? Because of panic and irrationality is my theory – certainly not because of company fundamentals. I could give many more examples of companies whose share price should be rising, but is not – a tell tale sign that markets have gotten carried away with themselves.

My own view is that we are approaching the bottom (although perhaps we are not quite there yet), although I would not like to predict when this period will end.

What I do have confidence in however is that markets will recover. Markets have always recovered. They have recovered from a great depression, two world wars, numerous more localised conflicts, black Monday (the 1987 one), the dot-com bust, 9/11 and the financial crisis. Why should this be any different?

The other reason that I have confidence that markets will recover is because of cash. One of the main reasons for the markets rapid rise over the past decade or so has been the paltry rates on cash savings since the financial crisis – say about 1% on average. In this environment, for anyone who wanted a sensible return, money has had no place to go but into the equity markets.

This factor, I believe, will be even stronger in this recovery. As of a few moments ago, the Bank of England has just cut rates to 0.1% – the lowest level ever. Given the current situation, I imagine they will be close to that level for a decade or so to come. At the same time the FTSE All Share currently offers a forward looking yield of over 6% (there will be some dividend cuts no doubt, but still). Economically this difference can’t be sustained and when we all emerge from our homes at the end of this, we will want our money to work hard for us – the only place it can go will be equities.

Finally, I am buoyed by the spirit of the entrepreneurial community. I belong to several business coaching groups and the ingenuity being displayed by businesses in finding new ways of working is very impressive. I stayed at a small hotel at a pub on Tuesday and the owner was just preparing to launch a food delivery service in the village to keep his kitchen running if the pub has to close – this type of creative thinking will be happening up and down the country.

In our own business, the reaction to the use of video calls has been incredible, with some clients commenting that they actually prefer this as a communication medium given the significant cost and time savings it affords. While we will always offer face-to-face meetings (nothing will replace that), I suspect we will all continue to use video conferencing more once this crisis is over.

We have also seen a rise in new client enquiries over the past few days as people use periods of self-isolation as an opportunity to get their affairs in order and attend to financial planning tasks that may well have been put off for many years.

Other businesses are also taking similar measures to make themselves more efficient and accessible. For example our legal partners have just introduced a completely paperless instruction taking and drafting service, meaning that we can create new wills, trusts and estate planning solutions for those who need them completely over video or phone call during this time.

Is This ‘Different’?

This is perhaps the most common question people have asked me over the past few weeks. Is this situation different? Do the normal rules apply?

The answer is yes … and no.

Yes – this is different. But only in the sense that every market downturn is different to the ones before it. The 2008 financial crisis was very different from 9/11, which in turn was very different from the dot-com bust and so on.

No – this is not different in the sense that I am sure we will recover from this. It might take 6 months, it might take a few years, but if the markets can recover from everything the world has thrown at them over the past 130 odd years (including many serious pandemics) then they can certainly recover from this.

If you would like some reading to help reassure you (and keep you entertained during lockdown) I would strongly suggest Factfulness and The Righteous Mind. I guarantee you will see the world differently after reading these books.

How We Can Help

Although clients thank us most when portfolios are rising, it is at times like this where we add most value and really earn our keep. The team and I are working harder than ever before and will continue to do so to support our clients through this time. I am proud and humbled by the effort and in some cases sacrifices that the team have made in providing an outstanding service to our clients.

We are in constant contact with our investment partners at Square Mile and other financial analysts and are monitoring and managing portfolios to limit the damage and make the most of the opportunities that exist in this market (and there are always opportunities somewhere).

Our new Zoom video conferencing system is now fully operational and there is something more comforting about seeing someone’s face versus just speaking on the phone. If you would like to schedule a video call to discuss your own situation or just wish to have a friendly conversation while self-isolating, just ask Kayleigh who would be more than happy to make the arrangements.

Comfort Reading For Uncomfortable Times

Next week, we will be sending out a whole host of curated articles and content to help you see through the market and media noise and make calm and sensible decisions in what is clearly an unusual and unsettling time.

We hope that this content provides some comfort (and entertainment) in the weeks and months ahead.

If there is anything more I can do to help you – please just ask.

Yours Sincerely