Investment Market Outlook
As expected and anticipated the investment markets have become increasingly volatile over recent weeks – due to a messy economic unlocking in the US and concerns about further ‘lockdowns’.
In short, investment markets are expected to be concerned by the data arriving about Covid-19 as the unlocking of the economy has created an increase in contractions of the virus due, it seems, from a failure to maintain social distancing and the medical professional’s general advice.
Further lockdowns will naturally create a worry to Investment Markets so we must rely on Government Policy makers to deliver the ‘hard work’ of lockdown that has transpired. A failure in controlling the virus will impact markets – maybe to a position previously experienced….
The US election is starting to weigh on the minds of investors – as the lead in the Polls is increasing in favour of former Vice President, Biden. Corporate Taxes will be increased if Biden wins the election so jitters are beginning to develop.
Positives for Investment Markets
The unprecedented level of financial support provided by Governments has supported the population to this point – leading to a disconnect between the economic data (in current terms) and the rebound to investment markets – to this point, although a little ‘reality’ has arrived at investment asset prices in the recent weeks. It is impossible to predict market movements – but it seems rational to expect volatility to remain. Low interest rates assist risk assets, so looking beyond the immediate crisis, an accommodative environment for equities looks likely although this must be considered in context.
Negatives for Investment Markets
Again looking beyond the immediacy of the Covid-19 crisis and the US election, the signals from the Global Bond Markets are indicating a lower returns environment, including a yield curve inversion and circa $17 trillion of negative yielding debt around the world – roughly 30% of all the debt issuance in the world! The 10 year gilt yield is in or around 0% p.a.
How is the Covid-19 crisis likely to unfold?
Are medical policies going to provide a solution to the crisis (is Society able to be responsible enough to comply with social distancing?)
Is a vaccine going to arrive and over what time frame?
How deep and protracted is the recession likely to become as a consequence of Covid-19?
Ultimately, where does inflation appear and how will this impact investors and why they need to be positioned accordingly?
The bottom line is that a low returns environment could develop, so the balance and construction of investment portfolios presents a challenge for investors and their advisers.
Diversification should therefore not be limited to active fund management – via asset class and geography.
We very much like (love is a better description) the funds we hold in our risk adjusted investment portfolios and we know that our out-performance is substantial and exceptional but we must be mindful that volatility impacts risk assets so we must communicate that short term volatility creates impact to the best of risk adjusted portfolios.
Diversification is essential to optimize portfolio construction – considering the different types of investment which deliver in different ways, at different times; cue Structured Investment and Deposit products within asset construction – across portfolios.
Investors should note that Structured Deposit Plans carry FSCS protection up to the limits for qualifying investors (£85,000) so as cash deposit rates are unattractive for fixed term capital, investors would be wise to consider Structured Deposit Plans.
Structured Investment Plans
Tempo Structured Products are issuing their new range of plans tomorrow – Issue 14 (look out for the terms).
Tempo have been working hard developing their plans, specifically focusing on the risk/return profile of their plans.
Tempo have previously produced the most defensive capital protection seen in the retail market. The indicators are similar terms will be issued for Issue 14 – with a quarterly Income Plan that will assist investors who require income – given the market turmoil and dividend cut, offering a strong coupon based upon the risk taken – with a unique memory feature (watch this space…)
We know that the coupon is a major driver for investors when they make their selections with Structured Investment Plans but we would certainly say that the full ‘shape’ of the contract, including the barrier and counterparty, must be the focal point.
Tempo certainly deliver ‘alpha by contract’ so their terms will be appealing to many investors.
Please note that taking urgent action to invest with the Tempo Plans is essential due to the likely high demand (we already have investors waiting to apply for the Tempo Investment Plans when the terms are launched on 30th June).
Due to market movements and demand, the plans can and have closed early, as many have experienced so we encourage urgent attention and investment if the plans fit your needs.
Risks – as always, you must be cognizant of the Risks.DON’T FORGET THE RISKS
As with all forms of investment there are risks involved. These plans do not guarantee to repay the money invested. The potential returns of the plans and repaying the money invested are linked to the level of the stock market and also depend on the financial stability of the Issuer and Counterparty Bank.
10 years ago today Tesla completed their IPO – listing at debut at $17 per share. Recently, Tesla has been trading at $1,000 – up 5000% over 10 years!
As always, we are here to help and assist so get in touch if you require advice.
Please note that we know we’ll be very busy over the next couple of weeks with new product action, along with carrying out reviews with existing clients, so early action is essential.
Warmest Regards and Stay Safe and Healthy.
Best Price FS Team