Keep Calm and Carry On?



Posted on: 30th September 2022

What a week!!

Given the frequency of recent events we know that we risk this commentary being out of date before we have even published it in fact as the week has gone on we have altered it several times.

However, we didn’t want to remain silent and we know that at times like this with news headlines awash with market and financial news that many of our clients value a “check in” and a view from us into your mailboxes if only to give you a summary view from our perspective and reassure you that we are here, we are watching and we remain abreast of your funds and their suitability to meet your needs.  

It has been a busy week of market turmoil. The day ended on Monday with the Bank of England deciding it would stick to its guns despite the pound crashing in the wake of Friday’s mini-Budget. 48 hours later the story was remarkably different.

With all eyes on the pound. Sterling crashed to an all-time low against the dollar on Monday m0rning but rallied amid expectations that the Bank of England was going to make an intervention to stabilise the currency. Then as evening came Andrew Bailey ruled out an emergency rate rise following the market rout. 

The Governor said the bank’s monetary policy committee “will not hesitate to change interest rates by as much as needed” to bring inflation under control. 

Minutes before the Bank’s announcement, the Treasury confirmed that Kwasi Kwarteng would set out a medium-term fiscal plan on November 23 with promises of yet “more to come”. 

Wednesday saw the huge intervention by the BoE in a bid to stabilise the situation and avert a pension crisis in the private sector defined benefit (final salary) arena.

Markets have responded to all of this with extreme turmoil – the unveiling of the biggest package of tax cuts in 50 years and hints of more to come have not in any way been received positively as far as the markets are concerned.  

Attention turns to the next few days to see if the interventions will be enough to really steady the markets. Still a weak pound against the dollar means of course that it will be more expensive to buy American goods.

Our new Prime Minister stands accused of playing “A level politics”, she is however firmly sticking by the strategy that “this is the way to growth” but our politicians remain locked in fundamental differences of opinion. 

A 15 percent drop in the value of the pound is unlikely to mean that an IMF bailout is on the cards though albeit their assessment has been less than supportive of the strategy.   

And all of this ontop of what has already been proving a frenzy of volatility for the market, and for your funds, created of course by the despicable war in Ukraine and ongoing supply issues as a result, the ensuing energy crisis and inflationary pressures.

The war undoubtedly continues to exacerbate supply chain problems adding to inflation pressures. That said, last weeks “partial mobilisation” by Putin with up to 300,000 reservists called up to fight in Ukraine and reports of sold-out flights and heavy border traffic did have a remarkably limited reaction from the markets at the time. An apparent annexation to be announced before the end of the week we will see what market’s reaction to that will be.

But, with most developed markets inflation at multi decade highs and central banks largely seeking to tighten monetary policy in response, (with the exception of China) fears of recession are mounting.

Is it all doom and gloom? Well, there are going to be some more very tough weeks ahead of that we are confident.  The markets will be rocky, and unpredictability remains high.

What can we do?

Well to cut a famous Kipling line “If you can keep your head when all about you are losing theirs……………….” – may just guide us through these next few weeks.

For our part we continue to monitor your funds avidly and actively – not simply in terms of performance but in terms of the fundamental credentials that those funds actually have. We consider the fund manager record and our confidence in both their strategy and tactics, the peer performance of funds, the fund manager actions and ability to make the tough calls in an unpredictable market. The experience of your fund manager in navigating the conflicting conditions and seeking out opportunity where it is available and adjusting asset allocation where appropriate is really important in times of such volatility.

The Haven calendar this week has been busy seeing meetings and interactions with Prudential, M and G, Liontrust, Aviva, and Royal London to name a few.

Navigating these choppy waters geo-political uncertainty and limitations is key – that is the fund managers role and is why we choose them, monitor them and what shapes our recommendations to you.

Understanding this week their approaches in tackling these conflicting conditions and having insights into their reactions to the challenges in these “abnormal” market conditions is both insightful and reassuring. Their skill and ability to seek out opportunity when all asset classes are in similar territory and markets are dramatic has been reinforced in our meetings with them.

Fundamental lessons learned from previous Stock Market volatility and decline remain the bedrock of our actions:

These events can be frightening and worrisome in the short term, but prudent longer term investment, in other words – staying in the market, shows as far back as the 1890 Baring Brothers Crisis , the 1930’s Great Depression to closer events within our own living memories, the financial crisis of the 2000’s , that staying the course is the right thing to do. And it often proves true that the stock market and the economy do not necessarily go hand in hand.

Our Prime Minister defends last week’s mini budget and insists that the tax cutting measures will lead to long term economic growth, that part remains to be seen for now – but history shows us definitively that patience not panic is key for us as individual investors.

We will of course continue to avidly monitor the ongoing unfolding events and keep you informed where appropriate.

Meanwhile, we wish you a pleasant weekend and as usual feel free to get in touch with us in your usual way should you require anything further.