Review of 2019 and looking ahead to 2020
After the FTSE 100 peaked at 7778 in May 2018 (the highest in the last five years) investors were brought back down to reality by December 2018 when the FTSE dipped during that month to 7216. As you can see from the chart below, we’ve seen a volatile market during 2019, but are now back above 7500.
Looking at the last five years, in December 2014 the FTSE was at 6545, so if you tend to go for a passive rather than active investment strategy and you’d invested solely in the FTSE 100 from December 2014 to December 2019, your simple return each year would have been less than 3%. Better than the banks, but probably less than the return you would like to achieve for the additional risk taken.
Throughout 2019 investors have been asking ‘are we going into recession?’ For sure we are in a mature part of the growth cycle but Central banks have reacted by reducing rates in the second half of this year, which has had a positive impact on global economies.
There’s no doubt that the current economic cycle has allowed the U.S. and other developed economies to grow without generating significant inflation pressure, with central bank easing in particular helping to stave off short-term recession fears.
The chart below shows the percentage of central banks from a sample of 32 that have lowered interest rates over the past three months. 2019 has seen the largest amount of central bank easing since the 2008 financial crisis.
Looking ahead, what are the known risks for 2020? …
If the trade war between China and the US is left unresolved it could deliver a fatal blow to global business confidence, investment spending and global supply chains.
Central banks could begin to hike interest rates if they believe growth risks have passed and inflation pressures are building (realistically they can probably put increases off until 2021).
The U.S. presidential election, where the victory of a progressive Democrat, such as either U.S. Senator Elizabeth Warren or Bernie Sanders, could trigger a policy shift that is negative for corporate profits. (Let’s remember here that Trump will want to settle the trade war ahead of his 2020 re-election bid)
Other geopolitical risks such as an escalation of Hong Kong unrest, which could trigger an aggressive China response and subsequent global sanctions on China, or actions by Iran that threaten global oil supply.
Where can I look for investment growth in 2020?
Clearly choosing the firm and investment adviser to manage your investment portfolio is a complex task. Is it best to opt for passive investments (eg index trackers) or active investment management (where you hope that the fund manager will outperform the index he’s measured against).
Our view is that it’s best to have a flexible investment strategy that does not believe that one particular method is inherently superior. We use a combination of active and passive investments, with diversification being key to avoid taking on too much risk and practice global asset management to expose portfolios to more opportunities and guard against domestic downturns.
We are active in making investment decisions so are always in a position to make changes to a client’s portfolio depending on market changes and projected market conditions.
Typically, our portfolios include a mix of multi-asset funds (property, cash, equity and bonds), index trackers and tactical equity funds. The weighting in each asset class varies according to our individual clients attitude to risk and income/growth requirements.
Why include passive index tracker funds?
Including index tracker funds will give your portfolio the best chance of real growth whilst reducing the additional risk taken when choosing a fund that employs a fund manager with the aim of outperforming the index. By incorporating index tracker funds you can add diversification and take away the risk of a fund manager underperforming the index.
We use a number of index tracker funds giving us exposure to different geographical markets and asset classes. US index trackers have performed well, offering growth of over 9% this year and over 100% cumulative over five years. The chart below shows Global index trackers such as Health and Pharmaceuticals, which have offered stable year on year growth, with a positive return every year in the last ten years and over 70% cumulative growth over five years.
So why include actively managed funds?
Using a combination of active and passive has worked well for us. Actively managed funds offer an opportunity to ‘make hay while the sun shines’ by giving a tactical play on either geographical and/or industrial sectors showing excellent growth. As you can see below, global technology funds have performed well, returning around 9% in 2019 and just under 200% cumulative over five years.
Do I need to review my portfolio?
I would like to stress the importance of taking specialist advice so that you can establish whether your investment or pension portfolio is adequately diversified and take advantage of growth opportunities as they arise.
If you would like assistance from us contact firstname.lastname@example.org
Speed Financial Solutions are a highly qualified financial services provider looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your pension planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to your advantage. Our relationships are built on trust and mutual respect. We are ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, and a qualified Pension Specialist among other areas, including Taxation and Trusts. Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner.
Please take a look at our website – www.speedfinancialsolutions.com
For further information contact us on Tel 951 315 271 or 951 318 529
We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
The contents published are not recommendations or decision aids for your investment decisions and they do not constitute any type of advice. We are not tax advisers and independent tax advice should always be sought.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
20 December 2019