#8 🔊 Austyn’s Weekly Financial Strategy.

Below is a link to a short Q&A audio interview I’ve just recorded where I give my thoughts on the continuing unprecedented events.

Link to Audio Recording

Nick Griffith:

Great to have you on the call. It’s our weekly call. It’s Nick Griffith speaking to Austyn Smith. And it’s now Thursday 30th of April, 2020. And we’re going to be looking at some of the latest news, and some of your questions that are coming in. So Austyn, stock markets may have gone up in recent days but the real impact to the economy has yet to hit. What do you think is the truth about what’s happening?

Austyn Smith:

Yes. Well certainly April has been a friendly month in terms of stock market returns, but the stock market doesn’t always reflect what’s going on in the real economy. That’s definitely the case at the moment, because there’s a lot of pain in the real economy, with a lot of people on furlough, or who have lost their jobs. This afternoon, the total U.S. jobless figure for the last six weeks now totals 30 million people, which is a quite a staggering statistic and it really reflects the pain of the real economy. And of course that real economy pain is the same in Europe as well.

And so whilst we’ve seen stock markets go up, that doesn’t mean that it’s all over. And I think this is one of the big questions we perhaps just need to discuss on this call, because there’s a certain element out there that thinks this is a ‘one and done’ situation where you’ve got one problem, you sort it out and then it’s done. Whereas actually as we’ve talked about in a previous call, this could well be a ‘W shaped’ recovery where perhaps we have an initial recovery, the economy reopens, but then unfortunately there’s a second wave of infections. And this is one of the things that is very much on my mind and everyone else’s mind that looks after people’s money.

W Shaped Recovery - Financial Strategy

Nick Griffith:

We’re clearly in choppy waters, and so I think a lot of people would like to know, how do you make decisions about a possible drip feed strategy in such times like this?

Austyn Smith:

Well I think you have to keep asking the question, ‘what is the truth of the situation’, and ‘what is the reality we’re currently going through?’ This is a health crisis, that’s caused a financial crisis, and so the financial crisis won’t get solved until the health crisis is solved. So, we have to look at the prospect that the global economy will reopen at some point in the next couple of months. It will reopen in stages and different parts of the world will open at different times. Especially in America, where some states are coming under pressure to release their lockdown early.

And so there’s a lot of research coming out of America that suggests that the first wave as we know is March /April time, then perhaps the economy will reopen, and then there might be a second wave in July, and then a third wave in November. So it’s very much looking like it’s going to be ‘stop start’ this year. And of course what happens when the various furloughs end where people perhaps have to go back to work, or if they can’t go back to work because their company can only operate at half capacity, does that mean further redundancies are happening at that time? Whilst there’s been a lot of speculation in the press about drug trials and tests that look positive, the reality of the vaccine being available say in six months is still quite tight. But let’s be optimistic and say that it is, the real issue is how quickly will that filter through to the general population?

There is an element of thinking out there that says the vaccine will be given to be the essential services first, such as health care, military, and police force. And so the general population will be a little bit behind in the queue. That’s not to dismay anybody or be a killjoy, it’s just really looking at what is the reality of trying to get a vaccine to a population or a global population, and what problems does that create in terms of what we’re trying to do, which is to protect clients and prioritise what’s important to them. The positive at this point is the technology that’s coming along, the ‘track and trace’ and where the testing, is going to be absolutely vital. There is the possibility of some form of health passport to allow people free movement as more testing takes place.

Nick Griffith:

Yes, I think you’re right. We are seeing some good news and some light at the end of this tunnel. What do you think in terms of cautious optimism, or is it time for us to be playing it safe ?

Austyn Smith:

I’ll talk a little bit more about the drip feed strategy because that’s a big question. When thinking about this, I like to think of three interlocking circles. And those circles are trying to do the right thing, for the right reasons, at the right time. And so, that doesn’t mean that you’re guaranteed to get everything right, but it’s looking at things from the point of view of doing things gradually because I think this is a long journey. So whereas certain parts of the market are speculating that it’ll all be over by June, July, that’s not a certainty at the moment so I’m not sure if we can take that chance.

And it comes down to a question that I like to ask, and that is, ‘if it’s not a clear yes, then it’s a clear no’. We can’t have any maybes at the moment. There’s no middle ground because otherwise we’d just be taking too many chances. So whilst there is an element of fear of missing out on perhaps a stock market rally that might be happening in certain areas, we do still have to tread cautiously. The analogy I use is that we’re steering the boat through choppy waters, something that I refer to as sort of Safe Harbour Planning ®, and that it’s really important to have a cautious hand on the tiller. Because even when the waters appear to be smooth, you can still have a freak wave or you get a strong gust of wind.

And so whilst good progress is being made and certainly has been over the last month in terms of stock market’s going up, the boat can still go over. And so we just feel a little drip feed here and there, a little strategic deployment of capital in certain areas will happen on an ongoing basis. And in fact, we’re just in the process of sending out our rebalances for May out to clients at the moment. And we feel that that’s the right thing to do for this part of the journey, but we will have to remain vigilant and adaptable to how that progresses.

Nick Griffith:

Yes. I think there’s another interesting element to what’s happening, which is when history has shown us that the valleys and the dips never last forever and we will bounce back. But also now is a good time for people to give themselves a head-start once the lockdown has lifted, which has given people new inspiration. What do you think?

Austyn Smith:

Yes, I think that’s true. The UK will gradually reopen probably towards the end of May, but it’ll reopen in a gradual way. And it will be based upon sector and industry. It won’t be a nationwide reopening and it won’t be a regional reopening. It’ll be based around businesses where social distancing can be maintained, because otherwise we’ll get a second wave of infections too quickly. I think this technology that’s coming along about enabling people to track and trace, that’s going to be very important.

And I agree with you. I think, valleys are only temporary. They’re not forever. And I think a lot of the work that we’re doing at the moment is based upon our experience of getting our clients through 2008/ 2009, using a drip feed strategy, taking things slowly, looking at it as a journey rather than a sprint; using this time really to get our ducks in a row, and to simplify. It’s actually a really good time clear things up, and look at all the ideas and projects we had on the back burner over the last few years, and we’ve now got time to bring them forward and innovate and create new services for clients and new ways of doing things. So there’s a lot of creativity and a lot of positivity out there, and businesses will adapt without a doubt, over the next few months. I think we’ll see a big leap in productivity when that happens.

Nick Griffith:

Yes. So do I. And I think in the interim it was good to hear you saying to me earlier that the technology platforms like Zoom have tightened up some of their features on security, which means that we’ve got many tools at our disposal to keep in touch with people during this journey.

Austyn Smith:

The reality is that we’re looking at a difficult period. I think we have to be real about that still, but there are lots of positives and we will get through it. And I think the other side there’s going to be a lot of positive things. Not least I think just the way people think in terms of it’s given a chance for people to reassess and to reconsider certain things, perhaps the way that they spend their money or maybe that certain other things are more important, such as our health. So I think there’s a lot of positive things that are going on.

I think Captain Tom, reached 30 million in terms of the money that he’s raised. And obviously we’re clapping for the NHS tonight. And I think actually coming through this, people will be regarding their essential workers in much higher esteem.

Nick Griffith:

I hope so too. And a good point to end on. Well, thank you very much for your time today, Austyn. And to everyone that’s listening, stay safe, stay healthy. And if you have any questions on today’s content, on your mind, then email them through to Austyn.

Past performance is not a guide to future performance
The value of investments can fall as well as rise
Portfolio performance varies according to client circumstances

About Austyn

Austyn Smith is a leading advocate of the ‘risk managed’ approach and ‘all weather’ investing, and has been featured as a Citywire ‘Cover Star’ in 2010, 2013 and 2017.

Following his work on risk reduction strategies, in 2011 he was recognised by Citywire Wealth Manager magazine as ‘Being in a position of some influence among your peer group, and likely to take a leading role in setting the investment agenda for UK Private Client managers.’

Austyn has recently contributed to leading publications by Citywire, and the Institute of Directors, and over the years has been quoted in the Sunday Times, Mail on Sunday, The Independent, and Bloomberg Markets.

With over 25 years financial strategy and wealth management experience, Austyn lives with his wife and children, Black Labrador and Springer, in Beaconsfield, Bucks.