We feel more confident that the impact of COVID may be less than the market is fearing. We’ve also been encouraged by a sizeable price increase across the industry.
What has happened to financial markets over the quarter?
Well, it’s been a nervous quarter for financial markets and stock markets have been choppy. Although, bond markets have been steadier. The FTSE 100 fell 3% over the period. Whereas global markets were stronger, principally driven by the strength of the US stock market. This helped produce a modest improvement in our portfolio’s values. Companies recent updates have suggested that things are not quite as bad as once feared, particularly in the US. As expected economic conditions, rebounded quickly as lockdowns were eased across the world.
COVID is still with us and we’re expecting a difficult Winter. The prospects for hospitality and travel industries look very challenging, but in general, many industries are adapting to the pandemic.
Have there been any worrying features of the market rally?
We acknowledge the pandemic has accelerated the take-up of many technologies. Tech company share prices have surged. Valuations for tech stocks are now very demanding, particularly in the US and this part of the market appears frothy as speculators, chase the momentum. We don’t have a large exposure to these types of companies in the portfolios.
What changes have you made to the portfolios?
We’ve increased exposure to the polar capital global insurance position, which is a fund that is focused on American insurance businesses. We’ve been closely following developments in the industry over recent months, it’s been under a cloud as policy wordings have been tested in the courts regarding the COVID related claims, some early legal cases in the US are now being ruled in the insurance company’s favour.
We feel more confident that the impact of COVID may be less than the market is fearing. We’ve also been encouraged by a sizeable price increase across the industry. Our confidence in the outlook is improving and we’ve increased the size of the position. Towards the end of the quarter, we had exposure to an FTSE 100 index tracker. The UK market has been lagging other World markets for some time and the index composition has changed. It appears cheap in relation to other international markets. The Brexit settlement is still overhanging the UK, but the majority of businesses in the FTSE 100 are international and domestic revenues are not particularly significant. Dividends on the market have been savaged by COVID, but these could be rebuilt relatively quickly. As a result, we’re adding further exposure here.
What is the outlook?
Well, the initial shock of COVID is behind us and we’re all adapting our lives. The worst affected businesses tend to be smaller firms, such as dry cleaners and restaurants. Companies trading on stock markets are larger and tend to operate in less badly affected segments of the economy. Profits have been hit hard, but we expect them to recover in time.
There are plenty of uncertainties out there such as the growth outlook and the possibility of higher taxes, but they’re also could be some good news such as the arrival or a vaccine. We believe that the portfolio is well-positioned in some interesting opportunities at the moment. We expect conditions to be challenging, but attractive returns could be generated over the coming quarters.
Park Hall Financial Services Limited is authorised and regulated by the Financial Conduct Authority.
The information within this article is for information purposes only and does not constitute investment advice. they represent the opinions of the fund manager and those of Square Mile. It does not contain all of the information which as an investor may require in order to make an investment decision. Any reference to shares/investments is not a recommendation to buy or sell. If you are unsure, you should seek professional independent financial advice
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