Market update – 14th December 2020
The tears have it
A very good morning to everyone. May we wish everyone a very Merry Christmas and a splendiferous New Year in what should be the last Innovation of 2020. It has been a year in which some of us old dogs have had to learn new tricks and I thought it would be helpful, and hopefully fun, to have a brief look back at some of the high and low-lights of the past 50 weeks.
I start with Tinterweb. Teams may be a simply terrible name for a bit of software, but this and Zoom (which in contrast is a tremendous brand name) and whatever, have become part of daily life. Actually, let’s rewind that last bit. They are not part of daily life, they have taken it over. Together with the evil vampire squid that is Outlook, our daily working lives have become a battle for survival against the online monsters that devour the hours of the day. It seems we cannot quite find the right balance between wishing to stay in touch in the Remote World and the fear of being accused of skiving off work and walking the dogs. The result is a fearful compulsion to be seen online all hours of the day and night. And please don’t get me started on ‘oh don’t mind the dogs barking in the background, I think there’s someone at the door’!
Next in this list of personal randomness is the United States. I shall miss President Trump, he has been a failsafe backstop if there was ever a Monday morning with nothing else to write about. Should we remember his (first?) term for its tax reforms, or for his refusal to accept that the climate is changing? It is not an either or, he did both and will be remembered for both. Whether he is one of the greatest, or clearly the worst, president in history is purely personal preference. Investment-wise, the S&P 500 Index has risen by around 75% since his election at the back end of 2016. Whether by accident or design, that is not to be sneezed at.
COVID probably needs to fit into the list somewhere. Having thought that Gavin Williamson was home and hosed in the ministerial competition of inanity (or should that be insanity?), he has been pipped at the post by the lachrymose Matt Hancock. The Health Secretary’s televisual performance was utterly bizarre and actually quite disturbing. Never mind, let us recall some facts about the year. First, it is quite obvious that there was COVID in the UK, and probably many other places, for much longer than has been admitted. Almost everyone knows someone who knows someone who had this weird flu in the autumn of 2019. Having got that straight, the developments of the vaccines are an astonishing jump forwards in science. One might suggest that testing has been minimal thus far, this being a necessity of the short amount of time. But leaving aside the caveats that we cannot know the long-term side effects or efficacy, then it really is hurray for the developers. We may all have to have two jabs every six months forever, possibly, but we have learned that we can deal with this type of pandemic. Which is a good thing, and I apologise for this, as the next one – COVID 22 or COVID 25 – may just be very seriously nasty.
Are we better prepared for the next pandemic? It doesn’t feel like it. Lockdowns still seem to be needed to stop the spread, and as soon as these are lifted we all start travelling and infecting again. ‘All’ is an exaggeration, but it makes the point. Economies remain fragile in ways that, twelve months ago, we had not appreciated. Some changes, though, feel more permanent. The quest for living in crazily expensive city centre boxes, for example, versus a need for quality space. Yes, we will spend more time back in our offices, but not all day, five days a week. Very few companies actually need (doubly stressed: need) the office space and expense that they had in 2019. The future is smaller and more flexible.
I am very tempted to climb a Christmas soap box about the need to shrink the global economy in order to achieve decarbonization. I will resist the urge and leave issues of why the world wastes 30% of its food production until another time. But it leads into ‘ESG’ (Environmental, Social and Governance), which is possibly the biggest investment story of 2020. Currently this is something of an ill-thought-through frenzy, but that will calm down in 2021 and become the stronger for it. There are two important and connected issues from 2020. The first is that the speed with which the world is decarbonizing has picked up very significantly. Renewable energy, for example, has transformed from being something of a niche side-line to being accepted as the way power generation is going to be (with a little complication from the nuclear industry). The second, is that the concept of ‘sustainable’ investment, of which ESG is a part, has also moved from being a fun little distraction to being completely mainstream. Both of these were going to happen anyway, COVID though has just pressed hard on the accelerator.
Power is the constant fragility that is still so frequently skipped over. The change in working life means that we are even more reliant on Tinterweb, which brings us full circle in this short article. Economic life requires access to the web and power to let this happen. Our essential utilities include our broadband, our routers, our cybersecurity, and our access to electric power. As I argued last week, COP 26, in Glasgow next November, is Boris’ genuine opportunity to be a global leader. I do not think he will drop the baton. (I made it, not one mention of Brexit…).
Jim Wood-Smith – CIO Private Clients & Head of Research
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