The latest quarterly Town Close Financial Planning Investment Committee Meeting took place on 11 October 2021.
The TCFP Model Portfolio remains unchanged.
Nothing significant has developed within the markets since our last meeting. The global economy continues to expand and the TCFP model portfolio is positioned for that.
There is a feeling of “steady as she goes” coupled with some treading water. After the excitement and noise of the previous 18 months this might be a bit discombobulating. But peace and quiet is no bad thing.
We are not expecting any major market movements in the foreseeable future. We do expect the usual 10-15% equity market drop (yet to happen this year) which we can take advantage of by simply rebalancing.
There was not much to discuss so we spent most of our time on a biggy….
Intervention
Governments around the world intervene more and more in our lives and the capital markets.
Whether those interventions are good or bad, necessary or unnecessary, can be debated until the cows come home. But that’s largely irrelevant.
What is relevant is that interventions, the well-meaning efforts to achieve stability, are exactly what creates the next major crisis.
Look at the current situation with gas prices and supply. There is mass intervention in terms of how we buy gas – it goes through all manner of quango-ish bodies. The problem is exacerbated by the desire for “green” energy (via very inefficient sources) coupled with the discouragement of unpopular new technologies (e.g., nuclear). The net result is a mess.
Only the power of the decentralised free market has the wherewithal to identify and solve such problems.
Governments and other (semi)elected officials do not. Intervention should properly be seen as the centralisation of decisions and therefore power.
No centralised system has yet worked in the history of humanity. Increased centralisation, however well-meaning, simply increases risks.
We can see this playing out in all manner of places and it is what it is. Eventually there will be a zig or zag in a different direction (see Thatcher and Reagan eras for previous evidence).
I am not necessarily advocating more or less centralisation – my political philosophy views are irrelevant when it comes to the sensible stewardship of your family wealth. I am simply identifying that the next very large crisis is already brewing.
The increased risk that increasing intervention causes is, in narrow investment terms, a good thing. It brings with it increased opportunities of outsized overall investment returns.
And all we have to do is be mindful of the above and being ready to act. TCFP is both looking out (keeping an eye on the yield curves turning negative) and ready to act (with our discretionary investment permissions).
In time the opportunity that presents itself will be big. We don’t know where or when, but it is inevitable. We have no option other than to weather the storm and then start making hay, knowing that the sun will soon start shining again.
The opportunity that will present itself will be the biggest, strongest, most successful companies around the world will be available to buy for 40 or 50% less than their usual price.
Taking advantage of that opportunity (as we did last year) allows you to make better returns than the index alone.
We are ready.
Inflation
We did cover inflation quickly. It will rise to 4%+ (last seen in 2017) and it will, most likely, be transitory. The Bank of England may or may not act. Your investments will be fine either way over the long-term.
TCFP Portfolio
All in all we are where we expect to be, and we are happy with our equity split and bond position within our portfolio.
And that covers everything discussed in the meeting. The next meeting is scheduled for January 2022, or sooner should needs be.