This week, we update on the latest financial and economic news, and report back on our successful first webinar.
The shift to working from home under lockdown ruling has meant that many of us can wake up a bit later, and stuffy train journeys seem like a painful memory. However, the new workplace norms will spell difficulty for commercial real estate, as many businesses see this as a chance to innovate and lose costly overheads. According to research by Accenture Plc, 40% of bank executives plan to reduce their real estate footprint as a result of the pandemic1.
Brexit has taken a backseat over the past six months, as COVID dominated headlines, but now the divide in stock market performance is painting a stark comparison between the British and Eurozone economies. Fuelled by the historic rescue deal, the Euro Stoxx 600 edged closer to positive territory (-1.5%) over the year period, whilst the FTSE All Share remains 13.5% down. Furthermore, the euro is trading at its highest since October 2018 against the dollar, and there is an expectation that Sterling will fall further2. The deeply depressed sentiment around UK equities presents an investment opportunity for those willing to take on risk, especially considering that a weaker pound will benefit FTSE 100 Index companies, which gain nearly 80% of their revenue from overseas.
Elsewhere in UK politics, the Chancellor Rishi Sunak delivered a blow to the majority of public sector workers in the first (of what can be assumed) of many, cost saving measures. With public debt spiralling higher following the initial emergency response, we will be forced to answer the question, of who will pay for it? On Tuesday, the Treasury announced above inflation pay rises for nearly a million public sector workers, but this will cover less than one in five public sector workers, with nurses and carers among the less fortunate3.
It is not only governments that will have to take a deep blow to their pockets in the wake of the pandemic, with insurance companies also looking set to make heavy losses, following a surge in claims. Swiss Re reported a net loss of $1.1bn in their first half, with COVID claims and reserves totalling $2.5bn4. It is estimated that the insurance sector will take a hit of over $200bn this year due to the pandemic5.
Gold and silver prices began a rapid climb last week on fears of a resurgence of virus cases in the US. Silver jumped more than 8% on Wednesday, with the support of a potential increase in industrial demand on the cards as factories re-open. Holdings in exchange-traded funds, backed by silver and gold, are at record highs. This gives many a cause for concern, with signs that the rally could be over-extended. Both metals’ relative-strength indexes are above 70, a level that suggests to technical traders that prices could soon pull back6.
On another note, this week Holden & Partners hosted our first webinar. We covered all things sustainability; from the language used to describe responsible investment strategies, to dispelling old myths, to new themes emerging as a result of recent events. We were very grateful to be joined by Claudia Quiroz from Quilter Cheviot. Claudia was able to give us an insight into how she considers sustainability issues when managing the Climate Assets fund and how identifying companies that are providing solutions is a key part of her investment process7. We must also thank our brilliantly interactive audience for asking some thought provoking questions that enabled us to expand upon the content of our presentation and make our discussion even more in depth. If you were unable to join us for the webinar, never fear, we will be making a recording available for you to view at your leisure. So please keep your eyes peeled, we’ll share it shortly.
One of topics covered during our seminar was that of diversity within business and its influence on investment, sustainability and social justice. The idea that business leaders should be representative of the wider society in which they operate is not just a ‘nice to have’ but has been shown to have a beneficial effect on company performance. A 2003 study of Forbes 1000 firms found that the presence of women and ethnic minorities on company boards had a positive impact on firm value8. A more recent study also linked diverse company boards with lower stock volatility and higher profitability9. It is clear that diversity within the groups of people making key business decisions is important to ensure diversity of thought which, in turn, fosters innovation.
At Holden & Partners we embrace diversity, inclusion and equality as central values. We recognise the importance of healthy development and appropriate use of a wider talent pool to improve growth, competitiveness and the future-readiness of economies, businesses and society as a whole. We will continue to learn, adapt and hone how we include diversity as a key consideration when conducting our investment research.
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