The Federation of European Independent Financial Advisers

As British holidaymakers face a mandatory 14-day self-isolation on their return to the UK from Spain, I decided to dig deeper for a better understanding of why the Government made such a decision, creating a sense of panic, announcing it only hours before it came into force.

Even transport secretary Grant Shapps was caught out by it – heading off to Spain just before the decision was made!

Whilst trying to ignore the various conspiracy theories surrounding this decision, it does beg the question as to whether the Government want to encourage British holidaymakers to consider ‘staycation’ destinations within the UK to boost the tourism industry and the British economy in general rather than losing that money abroad!

But surely politics wouldn’t play a part in the pandemic and free movement?!  Speaking of politics and the virus, Chief medical Professor Jonathan Van-Tam has said there are enough doses of Remdesivir (one of the drugs proven to help people recover from Covid-19) for UK patients. It follows news that the Trump administration secured almost all the global supply of the drug over the next few months!

Quarter 2 Results

Before moving on to look at the Covid data, a quick recap of Quarter 2  2020 on the financial health side of things reveals that Q 2 was one of the strongest quarters on record for stocks, with global equities up 19% in sterling terms. The FTSE 100 and China lagged, whilst information technology and small companies were the strongest.  Does this mean that the historic monetary and fiscal stimulus measures introduced have been enough to overcome the virus induced slowdown?  Time will tell, the European Central Bank (ECB) Executive Board member Benoît Cœuré said that the euro area may not see positive interest rates for at least another five years.  So it’s safe to say that savers leaving their money on deposit are highly unlikely to beat inflation in the medium to long term.

Following a report from Public Health England warning of the increased risks associated with coronavirus, Boris Johnson is launching the government’s ‘Better Health’ campaign designed to tackle obesity.  Restaurants will have to publish the number of calories in their meals and prescribed cycling is on the agenda after a No 10 spokesperson said “Covid-19 has given us all a wake-up call,”.

Looking ahead, whoever wins the US election in 2020 will have a huge task in rebuilding the US economy and tackling likely high levels of unemployment.

Back to Spain and the Corona Virus …

The Spanish government is without doubt frustrated with the blow dealt to its tourism industry – but has said there will be no “tit-for-tat” restrictions placed on the UK.  So which European countries are doing well on the Corona count and who’s struggling …

Monaco sets itself apart with 50 days since the last reported Covid 19 case.  Whilst Norway, Sweden, Denmark, France and Spain are at two days since the last reported case (although this changes daily so cannot be used as a marker).  Of the British Territories, Guernsey is now at 85 days since last case and Isle of Man 66 days,  with the Falkland Islands at 92 days. The UK and other European countries have not fared as well, the UK reported 745 new cases at the time of writing.  To see the full information from around the world click the following link to go to the World Health Organisation chart, which is updated daily:

https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200727-covid-19-sitrep-189.pdf?sfvrsn=b93a6913_2

The following charts are snapshots from the information available:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source:  World Health Organisation 27 July 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source:  World Health Organisation 27 July 2020

If you want to see the source information go to the World Health Organisation Dashboard: https://covid19.who.int/

You can see from the following breakdown of the Spanish regions which areas are most affected by Covid 19:

 

 

 

 

 

 

 

 

 

 

 

 

 

As I write there is talk of Quarantine for people returning from Spain being cut from 14 days to 10, according to The Telegraph. The newspaper reports that returnees will be tested eight days after they land. A negative result will allow them to come out of self-isolation two days later. Could Grant Shapps benefit? The transport secretary is flying home so he can “get through quarantine” asap.

Investing around a US election and Covid 19

The only thing that can be said with any certainty is that, whatever the course of the US election campaign and the result, volatility seems likely to continue.  Within your own portfolio, are you looking to generate income or growth or create forms of diversification that can allow you to blend your portfolio so it can meet those needs as they evolve over time?  Core to this is to have a very strong Investment Manager who has experience, and to ensure that sufficient diversification is maintained within your investment portfolio.

How diversification works

Imagine you own two businesses:

  1. An ice cream shop, by the beach — it sells a lot of ice cream in summer, and
  2. An umbrella company — it sells lots of umbrellas during the winter

These two businesses are growing their sales each year. But, at different times of the year, one company will do better than the other.

These companies are ‘non-correlated’. Meaning, the shares tend to move in opposite directions. However, they are both growing over the long term.

There is considerable evidence which suggests the more diversified your portfolio is, the better, because, as Bessembinder et al. found, at times, less than 5% of stocks account for all net wealth creation.  Do not underestimate the power of diversification.

Systematic/Market Risk

The risk everyone in the stock market faces is called systematic or market risk, or “non-diversifiable risk” because, as you probably guessed, it’s not diversifiable. It doesn’t matter how many stocks you own.

Going back to our simple two company example, during the COVID-19 restrictions few people have been buying ice cream or umbrellas, so both investments would have fallen. That’s market risk.

HOW HAVE YOUR INVESTMENTS PERFORMED SO FAR IN 2020?

We’ve been monitoring how our portfolios are reacting in this unchartered territory and due to the diversification and tactical equity holdings I am pleased with how they have held up.  Some of our tactical holdings, including technology, are showing fantastic returns even in the current climate.  If you’re concerned about your own portfolio, speak to Speed Financial Solutions today – and remember that the investment environment changes all the time, so have regular reviews of how your affairs are structured to ensure that your portfolio is aligned to your attitude to risk AND offers you sufficient diversification to reduce risk as much as possible. ​​​​​​​​​​​​​

The above article was kindly provided by Andrea Speed from Speed Solutions and originally posted at: http://www.speedfinancialsolutions.com/pain-in-spain/