Market commentary: Aug 2022
Queen Elizabeth II died last Friday. The longevity of her reign has ensured that tributes have flown from all corners of the globe. What we found interesting was a comment from The Guardian about her influence in the world. “She was a mistress of soft power, knowing when to project full majesty and when to play kindly grandmother, and a diplomatic resource. At times she could make Britain’s case to a foreign head of state better than any politician”. We reckon some people could learn from that.
Portfolio performance
At the risk of sounding like a broken record, inflation remains front of mind for investors. The collective market mind is constantly predicting where interest rates will go and the impact on the economy. The word “recession” is bandied about. The result is volatility in share markets and reduced market prices for bonds. Looking at client portfolios there are negative returns for both shares and bonds. It is important to understand that these are unrealised losses and that periods of time like this are temporary in the market cycle. We remain disciplined and consistent with our investment approach and methodology. Our fund managers continue to invest in quality companies with competent management, strong financial position, and outlook, and are currently taking advantage of lower prices. As always, we maintain healthy levels of cash in our portfolios and it’s a comfort to see cashflow from interest and dividends continuing as normal.
Responsible capitalism
Responsible capitalism accommodates private ownership and the pursuit of market opportunities (and profit) while achieving societal goals. Consumers today are far more discerning, and governments are regulating to force change. Businesses - both big and small - are responding. A quick online search of companies ranging from Amazon and Boeing to Mainfreight and Fisher & Paykel Healthcare, reveals commitments like; net zero carbon by 2030, reducing water usage, improving packaging to reduce waste, sustainability for their people and customers, tree planting etc. Investment markets continually seek investments with highest return for least risk and it's encouraging to see this search for profit aligning with positive change in society. This is also reflected in the managed funds in our client portfolios.
Transportation transformation
It is possible we are at the dawn of a decade long move toward vehicle automation with profound implications for many aspects of the economy. Government incentives and tighter emissions standards for fossil fuel burning cars, falling prices of batteries, along with better performance and longer range, are making electric vehicles (EVs) more appealing to consumers. Tesla is a clear leader but incumbents like General Motors, Mercedes, Toyota, and Volvo, are committing billions to transition to all electric or offer electric alternatives to all fossil fuel models. GM and Alphabet are a step ahead having launched fully functional robotaxi services, and self-driving truck start-up TuSimple completed a 130km unmanned truck journey on public roads. Looking at this through a positive lens, you could say this is responsible capitalism!
Richard Grimes, Director and Financial Adviser