Apart from the uncertainty of whether or not you will still be able to use your UK bank account after 31st December 2020, there are plenty of other things going on to mess around with our lives such as Brexit, the US elections, coronavirus with its lockdown, and other global disasters. With all of these things happening, it is hardly surprising that people think that investing money in stocks and shares (equities) at a time like this is crazy.
However, we have what appears to be an illogical movement upwards in equities, especially noticeable in the USA. How can this be? They have Donald Trump! In the rest of the world, there have also been sharp upward movements since the coronavirus led crash in March 2020 (other than the UK and I will return to this later). The fact is that billions have been pumped into the global financial system to fend off another financial crisis. Some companies have fallen anyway but others have developed, or sprung up, which has led to a much prettier picture than the press would lead us, or even want us, to believe. Coronavirus and Trump seem to be the only stories pushed our way.
When there is financial stimulus, there are opportunities; not only to survive but to develop. Robert Walker of Rathbone Investment Management has this investment outlook.
“We can expect more monetary stimulus and support from central banks that have an enormous amount of unused capacity available for alleviating any renewed stress in financial conditions which is positive for equity markets. This should keep corporate borrowing costs low.
We do not believe therefore that this is a good time to reduce our long-term equity exposure, but economic and political uncertainty warrants cautious positioning and a bias towards high quality companies where we believe that earnings growth is still possible. We believe it is sensible to remain broadly invested but with a continued preference for growth and only high-quality cyclical companies that can benefit from a shift to a digital and more sustainable economy.
We believe high valuations of growth businesses are underpinned by the increasing scarcity of growth opportunities while interest rates and the returns on low risk assets are expected to stay low into the foreseeable future.”