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Investment Committee Meeting Notes, 12 July

The latest quarterly Town Close Financial Planning Investment Committee Meeting took place on 12 July 2021.

The TCFP Model Portfolio remains unchanged.

Nothing significant has developed within the markets since our last meeting. The expansion phase is underway and the TCFP model portfolio remains well positioned for it.

As ever we do not expect anything out of the ordinary to happen in investment markets other than the usual 10-15% equity market drop (yet to happen this year) which we can take advantage of by simply rebalancing.

Should anything more drastic happen we will look to sell bonds to buy cheaper equities as we did last year.

We discussed a few topics as follows:

Inflation

Higher inflation this has been dominating the headlines which saw it as a big problem before, apparently deciding it was no problem at all. The truth is somewhere in between the markets overreacted and are now, maybe, slightly underreacting.

Bond markets moved in anticipation of higher interest rates that would likely come along to combat higher inflation. The fear was that we were heading from stable inflation to deflation. They have since decided that higher interest rates are less likely, probably because they do not think inflation will be the problem they thought it might. Since around April bond yields have fallen to reflect the expectation that interest rates will not be much high that much sooner than before.

Biden

Has much really changed since he was elected? It all seems a bit cosmetic to us. Lots and lots of executive orders, and even more rhetoric. Already his spending plans are coming down and down. Economically, everything is happening as expected and the dollar has strengthened recently.

Next year there are Senate elections. Biden will lose his majority and become a lame duck President and nothing much will have changed other than at a superficial level.

Brexit / UK

Regulatory change is the biggest stumbling block post Brexit. There is bound to be some problems along the way, but a very small proportion of companies will be affected as a result, but they will make headlines.

As things roll along, we are expecting a smooth transition over time and there is no cause for concerns.

GDP should pick up once restrictions have eased come 19 July. By the end of the year the UK economy should have caught up to where we were prior to the pandemic. This will only happen if everything opens, and it remains fully open. This is remarkably quicker than experts forecast (2 to 4 years).

On a whim I have decided that any reader who sends me any economic forecast (with proper stats etc. therein) that came within 10% of being correct will win a prize of something quite nice.

 

EU

The EU remains in doing poorly in comparison to the UK and the rest of the world. Bickering, poor vaccine roll out etc. continues to cost our neighbours.

There are elections in both France and Germany coming up. The results mean nothing when it comes to investments. There is nothing to see here.

TCFP Portfolio

Whilst we remain within the expansion phase, our expectation is that equity prices will continue to deliver fair value and a decent return. The outlook is good, and we are comfortable with our equity split and bond position within our portfolio.

We will await patiently to see what comes our way, until then we are happy with our current course of direction.

And that covered everything discussed in the meeting. The next meeting is scheduled for October 2021.

 

Boring But Effective | Truthful, Helpful, Kind

advice@townclosefp.co.uk 

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