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.

It feels to me as if, in general (notable exceptions being New Zealand and Germany for example), governments were a little too late to lockdown and we have exited lockdown a little too early. Katherine and I were shouting at the news for Boris to lockdown around a week earlier than he actually did, and we also feel that the ‘unlocking’ is coming a bit too early as well.

Others will disagree and if anything is for certain at the moment, it is that Covid-19, just like Brexit before it, is proving to be a divisive issue with people’s opinions largely informed by how the crisis impacts them and their family.

Although this is a vast over-simplification, I would summarise the position as follows:

The more severe the economic pain people are going through, the less they seem concerned with the health implications of the crisis.

The more severe the health impact that people have suffered, the less they seem concerned with the economic implications of the crisis.

Of course, these issues are never binary and there will be a variety of different views on the matter. The other issue is that we will only know which view was ‘right’ (if there is such a thing in this kind of situation) with the benefit of hindsight. I certainly know that I don’t envy the impossible decisions the government is having to make at the moment.

What I would say that we could all do with is a little more understanding. No matter what angle you view the pandemic from, it has touched all of us in some way and caused some form of pain or suffering – sometimes severe, sometimes moderate.

Whatever your view though, I think it is important to remember that other people may have been impacted in different ways.

In my personal little family bubble, we have definitely been more focused on the health implications of the crisis, to the point where we have barely left the house in 3 months. Other members of my wider family are suffering financially and therefore can’t wait for the economy to re-open.

Regardless of your perspective, the one thing that binds us all together is that we are in this together. We have already seen the capacity for human kindness and generosity during this pandemic and hopefully this will continue as we enter what could well be an extended period of ‘tough times’ for certain people.

Above all – stay safe, stay sane and enjoy the sunshine!

 

 

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.

Coronavirus – how we are dealing with things

Like many companies across the UK, we are heeding the governments advice and implementing various changes to the way we do business with immediate effect and until further notice.

We are doing everything we can to maintain our usual service to clients and to that end we are implementing many of our well rehearsed business continuity procedures.

Video Meetings
In line with government advice, we will be conducting the majority of client meetings via video call or telephone where possible and minimising face-to-face contact.
If you have a face-to-face meeting booked at the current time, we will be in touch very soon to make alternative arrangements.

Home Working
As of 5pm Tuesday 17th March, we have taken the difficult but necessary decision to close the office and all staff will now be working from home.
We have robust home working policies and procedures in place and all staff have remote access to our telephone system and software packages.
Therefore all of your inquiries will be handled in the usual manner.

Post
Post will be collected less frequently than usual from the office so where at all possible we would encourage clients to communicate with us via email or telephone.

Documents
Along the same vein, we will be minimising our use of paper during this time and will send all communications using digital means where possible.

Protecting our Quality of Service
We appreciate that this is a concerning time for everyone and it seems clear that the impact of the Coronavirus will be felt for many months to come. During this time we will be doing all in our power to support, reassure and advise our clients and their families. We will be using this time as an opportunity to improve and expand on the service that we provide to clients and we will continue to keep you updated on any further developments.

Coronavirus Update – 13th March 2020

It is refreshing to open an update with at least a paragraph or two not on Coronavirus (but more on that in a moment). We are pleased to report that we have completed our analysis of the Spring 2020 Budget document and the impact on personal financial planning is incredibly minimal. Except for some increases to National Insurance thresholds and some tweaks to fringe tax benefits such as Entrepreneurs Relief, there is little in the budget that will have any effect on current planning.

Perhaps if there is one good thing to come from the present situation, it is that we have yet another fairly benign budget from a personal financial planning point of view and this means that the current fairly generous personal tax regime will be maintained.

Back to the virus now and it is fair to say that the market is searching for direction. Headlines from yesterday reported some of the worst stock market falls since 1987. It is interesting to observe that at the time of writing this (which I will quote as 12:28pm on Friday 13th March given the minute-by-minute changes we are seeing) the FTSE 100 is up around 8.7%, effectively re-gaining much of yesterday’s loss.

Assuming it closes at this level (and there is a whole 4 hours for things to change before then!), don’t be surprised if this barely gets a mention in the media, despite the huge reports on falls of a similar magnitude yesterday. This only goes to show just how volatile things are at the moment and how rash decisions can have an impact on your wealth over the long term. The current volatility is almost entirely driven by emotion and not logic. There is almost no conceivable way that the long-term intrinsic value (over the next 30 years) of all of the worlds great companies (think Apple, Unilever, HSBC, General Motors etc) fell by 10% yesterday only to grow by 10% today!

Having consulted with our partners at Square Mile again, the view is now that most markets are starting to offer very good value and there are some real opportunities to purchase the worlds great companies at a significant discount versus where we were just 3 short weeks ago.

Coronavirus Update – 5th March 2020

We wanted to provide a further update on the Coronavirus and how this is impacting on portfolios.

The global stock markets have been incredibly volatile over the past few weeks as investors digest the minute-by-minute updates on the virus and how it is impacting on companies.

In the past 5 working days, we have seen some of the largest ever falls on some stock markets, followed almost immediately by some record breaking gains – volatility reins supreme.

At times like these it is important to remind ourselves of two of the timeless lessons of stock-market investing.

1. You can’t predict the market – trying to do so in the current climate seems even more futile than usual. The virus presents a new and uncharted challenge and it’s path is near impossible to predict. Markets are moving strongly in reaction to each new data point released.

2. If you miss the best few days in the markets, you often permanently damage your long-term returns. Fidelity wrote last year about the impact of missing just the best 10 days in the market out of the past 15 years. You can download and read their previous article on this here.

Given the extreme moves we have seen over the past week, there is a very high chance that at least one (perhaps two or three) day(s) will feature in the ‘best days’ table when we look back 10 years from now and thus, despite the media storm, this period could be one of the most important for your long-term financial success.

We took the opportunity on Monday to re balance portfolios given the significant divergence we have seen between bond and equity markets. Although an over-simplification, in essence this means that we sold bonds which had increased in price (and thus were making up a larger than desired part of the portfolio) and bought equities which had fallen in price.

Given the fairly sizeable recovery in equity markets over the past few days, this move seems to have been well timed and has assisted in the recovery of the portfolios this week.

We will of course continue to monitor the situation carefully over the coming weeks and months and we will write again with any significant updates to the portfolios.

As always, if you have any questions, please do not hesitate to contact a member of the Buckingham Gate team.

 

Coronavirus Update – 28th February 2020

We write again following our update on Wednesday. You will no doubt have seen in the media reports of further stock market falls over the past few days and many markets are now in so called ‘correction’ territory (usually defined as a fall of 10% from a recent high point).

To say that we are delighted with how the portfolios have been coping in this environment would be an understatement. We have been very conservatively positioned for some time now in readiness for just this kind of event and our cautious stance is now proving to be well placed. As of the close of play yesterday, the FTSE 100 was down around 7.8% for the week with the S&P 500 down around 10%. By contrast, the Buckingham Gate Balanced Active Portfolio was down by around 3.6%, demonstrating the benefits of diversification.

It is worth mentioning that the media attention will focus almost exclusively on the stock market and tends not to cover the bond markets. In the past week while stock markets have been falling, many bond markets have seen record low yields, which means record high capital values in many cases. As this process has unfolded, the fixed interest portion of our portfolios have been seeing healthy gains.

Although periods like these are unsettling, they are an inevitable part of investing. Although we can’t say when the Coronavirus threat will subside, when markets recover they tend to do so quite quickly.

Jason Broome, the Investment Director at Square Mile has also provided the below update to give some context on events:


The expansion of the coronavirus outbreak is frightening but needs to be placed into perspective. So far, there have been 3,000 cases out of a population of 6,000,000,000 if we exclude China. There will be further cases, but the disease appears to be containable.  Some nations, including poor ones, have been quick to isolate those infected and nip their outbreak in the bud. Even China, with nearly 80,000 recorded cases, appears to be winning its battle as the number of new infections fall. For the moment, we have confidence that other nations such as South Korea and Italy will take the steps necessary to isolate the disease. Sadly, we are less sure about Iran where the authorities have been in denial. The country’s links to Afghanistan and Syria seem to leave a high probability that the virus will find a base in the Middle East (though the arrival of summer could stem the rate of infection). If established in the Middle East, outbreaks will continue to pop up around the world as a consequence.
 
The human tragedy aside, the economic implications of controlling the outbreak are severe. Supply chains will be disrupted as factories close, popular events are being cancelled and health services will come under increasing strain. Markets are falling and approaching a level that we believe provide a reasonable reflection of the economic costs of the outbreak. We have been running a cautious positioning in portfolios for some time and last year we took steps to add positions that should act as insurance policies if markets fell as they have now done. Our portfolios are suffering as the market falls, but our earlier action has helped moderate the damage.
 
Today, we formally convened to discuss whether we should take further action to protect the portfolios. Sadly, we lack a crystal ball to tell us exactly what will occur. We considered various options and concluded that markets will remain volatile but broadly reflect the economic costs of the outbreak as it now stands. The situation is very fluid. We agreed to make changes to some portfolios, but these are minor in impact and we will advise clients as normal once the details are worked out. We also need to be very alert to the possibility that markets will panic and overreact to the outbreak. This may present opportunities for us to redeploy some safe assets into higher yielding opportunities.

As always, we continue to monitor the situation constantly and will look to act in your best financial interests.


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.

Market Update – 26th February 2020

You may have seen in the news that the stock market has suffered some fairly notable falls over the course of Monday and Tuesday. This is mainly in response to the increase in the number of Coronavirus cases across the world and in several new countries over the past week or so.

First and foremost, it is important to put things into perspective. Although the major stock market indices have fallen over the past couple of days, they have fallen from near record highs and so some element of correction is understandable in this kind of situation.

The second thing to bear in mind is the cause of the markets concern – mainly that consumers will be spending less in economies that are impacted by the virus and this is broadly true. However, the kind of spending that gets impacted tends to be consumer discretionary spending (new cars, holidays etc). Typically, this kind of expenditure gets deferred and not cancelled in situations like these, so most economists agree that the markets should get a boost later in the year when the virus has passed and people then make some of these deferred purchases.

Finally, we can look to history for some guidance in these situations (although keeping in mind the old adage that the past is not always a useful guide to the future). The graph below shows how markets have reacted to several previous epidemics. As you can see, the impact tends to be felt only in the short term, often with strong recovery only a few months later.


We are pleased to report that the Buckingham Gate Portfolios have held up very well in this environment. Over the course of Monday and Tuesday, the FTSE 100 fell by around 5.2% and the S&P 500 fell by nearly 6.7%. In contrast, the Buckingham Gate Balanced Active Portfolio fell by only 2.2%. This is as a result of the diverse nature of the portfolios, but is also a reflection of the fact that we have been very conservatively positioned for some time now in readiness for just this type of event.

We will continue to keep portfolios under review and may even use this period as an opportunity to take advantage of falling prices if valuations look attractive.

 

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.

Top Rated Adviser’s 2020

This month two Buckingham Gate Chartered Financial Planners have made it into VouchedFor’s Top Rated Adviser Guide for 2020.

The guide is distributed nationally in The Times and digitally through the Telegraph’s website and so this is a great achievement that Buckingham Gate are tremendously proud of.

Congratulations Matthew Smith and Peter Ditchburn for receiving such well-deserved recognition for the fantastic advice you provide to your clients.

What makes their inclusion in the guide so much more special, is knowing that it was thanks to their lovely clients for leaving such powerful reviews on VouchedFor.

VouchedFor is a leading review site for Financial Advisers and helps those looking for advice, find the right adviser for them.

Our unique combination of expertise, makes us a one stop shop for your retirement, investment and estate planning needs.

Matthew and Peter would like to say a huge thank you to their clients for taking the time to leave a review, it really means a lot to them.

If you’re looking for financial advice, you would definitely be in good hands with these two!

Because We Needed Something To Worry About

As I sat down to my Christmas Dinner this year, I recall being quite surprised at how settled things seemed to be. Not just in my own little home on Christmas day, but across the country.

The decisive Conservative victory in the election gives us a more certain path for the future and regardless of your views on Brexit or politics in general, I have always argued that uncertainty is almost always worse than the outcome, even if you disagree with the outcome.

As we went into the Christmas holidays, it seemed nearly certain that we would officially leave the EU on 31st January 2020. Of course, this is merely the beginning, and the end of January will signal the beginning of (supposedly) 11 months of trade talks which are designed to culminate in a trade deal by the end of the year.

So, despite the slight uncertainty hanging over the future trade relationship between the UK and the EU, all seemed to be sorted. We had a stable government, Brexit was going to happen and even the US and China seemed to be getting to the bottom of their trade dispute.

It was as if the world knew we didn’t have anything to worry about…

Of course, what followed is the US strike on Iran and the subsequent retaliation, giving us a whole new geo-political issue to ponder over.

Now, my feelings about this issue are just the same as with any issue (from an investment standpoint anyway) – keep calm and carry on will always be the motto.

What this just goes to show though is that there will never, ever be a ‘good time’ to invest. All those people who were waiting until Brexit and the election sorted themselves out will still be waiting to see how the US / Iran situation pans out, all the while missing out on what has been one of the best periods in market history.

The old adage that time in the market is more important than timing the market could not be more important, especially given that this uncertain world seems to be the ‘new normal’ as I wrote about a few weeks ago.

Some Brief Thoughts On The Election Result

Well it finally seems to have happened. People have voted to end the Brexit uncertainty and have delivered a clear Conservative majority government.

The early reaction from the markets is incredibly positive, with sterling up around 3 cents on the dollar since the results were announced last night and both the domestically focused FTSE 250 and the internationally focused FTSE 100 have posted impressive gains, the former breaking a new record today. In the case of the FTSE 100, this is especially impressive considering the significant strengthening of sterling – a factor which is usually negative for stock prices.

I have said for a long time that uncertainty is almost always worse than the outcome, even if the outcome is bad. No matter your views on Brexit, I do believe that having a conclusion to the whole issue will allow individuals, businesses and government to ‘get on’ and move things forward.

I know of many individuals and companies who have been delaying decisions around investing and hopefully this clear result will now unleash some of these held back investment funds.

Now of course things are rarely simple. The deal to take us out of the EU (which now looks very likely to be implemented on 31st January) is only the beginning and there will need to be future trade negotiations with the EU to hopefully secure a sensible, post divorce trading relationship.

Additionally, the SNP’s surge in Scotland will inevitably bring up the issue of a second referendum on independence. Although this will probably have a smaller impact on markets than Brexit, if the previous attempt is anything to go by, it could cause volatility in sterling and some short term uncertainty on the markets. I did mention at the client event a few weeks ago – I believe that political uncertainty is now the new normal.

I also feel that the Conservative victory is a victory for personal finance. Despite the Conservative manifesto essentially maintaining the status quo when it comes to personal tax and finance, that status quo, I believe, is incredibly generous. I don’t think that there is any doubt that last nights result is positive for wealth creation.

Finally, in all the election noise it was easy to miss some positive news out of the US last night with tentative signs that we might also get the start of a resolution to the US / China trade war.

All in all, Friday 13th has been lucky for markets, lucky for sterling and, lucky for the Conservatives.

The Buckingham Gate Investment Committee will be convening early next week to discuss the election results and consider if any changes need to be made to the portfolios in response. We will, as always, keep you updated on our latest thinking.