Market Update 24th December 2021.
This week the Omicron variant of Covid-19 continues to spread rapidly but it’s just like getting the common cold in most people and the vaccine, including booster jabs, mean very few people are suffering severe symptoms. It is widely accepted that the symptoms of the Omicron variant in the main don’t include the usual symptoms of loss of taste, sense or smell or have any other severe side-effects. A great number of those affected genuinely thought they had just caught a mild cold, in large part thanks to them being fully jabbed.
Bearing in mind the common cold is also a coronavirus, might this spell the beginning of the end of Covid-19 as a serious health threat allowing us to get back to normal and “live with the virus” as so many people have been saying? Let’s hope so. But will government’s be willing to relinquish such total control over us? That’s another question, – though very pertinent nonetheless.
Investors have either taken an optimistic view or just grown bored of the media hysteria surrounding coronavirus as the huge spike in infections has had little impact; the majority of stock markets around the world had a pretty good week leaving them to close out the year in firmly positive territory.
Elsewhere, it was reported this week that there may be alien lifeforms living inside gas clouds on Venus. Research from MIT, Cambridge University and Cardiff University modelled that the traces of ammonia detected could be coming from bacteria living in the acidic mists. We haven’t yet worked out what this might mean for bond yields but we’ll keep you posted 😉. Much more interesting than coronavirus too!
GLOBAL: DESPITE COVID MARKETS END YEAR IN POSITIVE TERRITORY
Risk markets performed strongly in 2021 despite periods of considerable volatility. The spread of Covid-19 and worries about inflation were the two biggest headwinds for markets but global equities have been fairly robust over all.
UK equities are up around 17% for the year, – although the vast majority of that coming in the first 8 months of the year, with the US being the only major market to produce better returns for UK-based investors. Other developed equity markets are also positive but the strength of the yen means that in the case of Japan gains have been modest.
Inflation and central bank interest rate rises have been the subject of endless speculation and this led gilts to lag most equity markets over the year as investors tried to anticipate when interest rates would begin to rise. One surprise this year has been the poor performance of gold. This is traditionally seen as a hedge against inflation but it has trailed for most of the year and is down around 5% in dollar terms, and we see this as an opportunity to continue with our recent position taken in gold – partly on the back of it having performed poorly throughout the year and therefore representing good value, and also because it can be a hedge against inflation, the numbers for which continue to charge forwards..
COMMODITIES: UK GAS PRICES HIT NEW HIGH
The price of natural gas shot up again this week due to high demand, restricted supply and concerns over Russia’s military build up on the Ukrainian border. A spell of cold weather in Europe put strains on supply as reserves are particularly low.
Russia has reduced its supply to Europe, in part due to colder weather there. In addition, concerns about a Russian invasion of Ukraine have spooked the markets sending prices up 20% on Tuesday. Ukraine is host to one of the major gas pipelines to Europe. Between 1 and 21 December the price of gas increased by around 85%.
Increased costs and a shortage of reserves have led to speculation about whether gas-intensive industries will have to be mothballed to prioritise domestic gas supplies. The price of gas in Europe and the UK is now far higher than other regions and this has caused several ships carrying liquIfied natural gas to Asia to divert to Europe. The incoming cargos provided some relief towards the end of the week with European prices falling.
UK: HOSPITALITY FALLS VICTIM TO EARLY OMICRON UNCERTAINTY
The total number of daily new coronavirus cases hit a record 119,789, up 54% compared to last week, due to the rapid spread of Omicron. The Westminster government decided not to take further action to stop the spread, however, it has not ruled out new restrictions after Christmas if the NHS comes under increased pressure.
Despite no new restrictions being introduced, hospitality businesses felt the effect as restaurant bookings were cancelled and retail footfall have declined sharply in December. Data from the ONS showed that sales at Pret a Manger’s London stores decreased by 29% compared to September.
Although warnings from scientists about the risks of socialising have caused sales to tumble, shares for large hospitality companies including the Restaurant Group, Whitbread and JD Wetherspoon all recovered this week following Chancellor Rishi Sunak’s introduction of a new Covid support scheme. The package will provide a total of £1bn for hospitality businesses that are suffering. It sounds like a lot of support but in reality is unlikely to stem the losses suffered over the Christmas period as the maximum grant per premises is £6,000 and their costs are likely to run into the 10’s or 100’s of thousands of pounds.
HONG KONG: PRIVATE OFFICE ASSET MANAGEMENT LIMITED HAVE GIVEN NOTICE TO SIMMONDS (INTERNATIONAL) FINANCIAL ASSOCIATES LIMITED THAT FROM THE END OF THE 3 MONTH NOTICE PERIOD, – QUARTER ENDING 30TH APRIL 2022, -WE WILL ONLY BE OFFERING OUR SERVICES TO THEM FOR THEIR CLIENTS BASED IN UK / WITH ADDRESSES IN THE UK.
We have enjoyed our time in providing our highly personalised advisory investment services to Simmonds (International) Financial Associates Limited for them to assist them in advising their clients investments, and we are very pleased with the results we have enabled them to achieve for their clients during the term of our relationship, and indeed during the period of the relationship we also allowed them to adopt the trading style “Simmonds Private Office (Hong Kong)”. However, we have decided that we now only wish to provide our services to them for their clients who are based in the UK / have UK addresses, and accordingly we have agreed that the end of the notice period will be 30th April 2022, as per the terms of our Partnership Agreement.
This fits with our revised business strategy which is to now solely focus all of our efforts in providing our flagship highly personalised bespoke managed advisory services to our existing UK clients, and to our strategic partners UK clients – as we now embark on the second stage of our significant marketing campaign across London and the home countries over next 6 months, – with the best team we have ever had now in place including 4 dedicated investment managers / advisers, assistants & research analysts.
We are also pleased to confirm that Shannon Read, our paraplanner is also accompanying the investment team and advisers to meetings to assist in greater depth with our push to provide a greater effort on the independent and holistic financial planning / wealth management side of our business, – and Shannon has also made excellent progress in adding to our modular back office and mid-office system – Iress X-Plan – which will enable us to provide a far greater depth of client reporting to cover non-invested assets such as property, cash deposits, national savings & investments, company pensions schemes, trusts and trust income, family fund structures etc. This will assist us in being able to provide our clients with valuable strategic cash-flow forecasts to predict, and plan for, expected / required income in retirement to enable a greater focus on the blueprint required to achieve specific targeted events for our clients in the future.
As we approach the end of 2021, the whole team at Private Office Asset Management would like to thank all of our clients for their greatly appreciated custom over the past year, and their frankly very humbling and lovely comments to us thanking us for our efforts over the past 12 months, which as many are aware, has been quite challenging of late for a whole host of reasons. We never take our clients for granted, and we are very much looking forward to being of continued, valued service throughout 2022.
Finally, if you enjoy reading this weekly update, please feel free to share it with your friends and / or family who may also find the contents of interest, and do not hesitate to contact us if you need any help, information or advice yourself about any of the areas covered this week.
With our very best wishes for a lovely, peaceful Christmas, and a very Happy and Prosperous New Year to you all.