Investing for the future

By David Hattersley
This article is published on: 14th May 2020

14.05.20

The start of a ‘new’ normality?
We are lucky to live in the region of Valencia as Phase 1 has started in some areas. Will this eventually lead to some kind of normality and what form will this take? While we have been prisoners in our own homes, the loss of freedoms and the changes that have occurred have led many of us to question what the future holds. With the obvious impact on the environment of less pollution, less freedom to travel and changing work environments, will we change our habits? How will these changes affect our plans for the future? What about our financial position and our relationships with people in the society that we live in? What will the globalised world look like in a year’s time? After all, we’re all connected to global humanity whether we like it or not.

Economy
Without a doubt this will impact global economies. Most economies will go into a recession, perhaps only for the short term, but deeper than we have known for many years. For those of us that have some form of fixed income, investments that are “ holding up” or have only fallen by a small percentage, have liquidity in our finances or have flexibility in our work patterns, we have to consider ourselves lucky.

But what of the future? No doubt there will be changes, but opportunities too.

Investing for the future
It may seem strange to consider this now, but the world has changed. Passive tracker funds and ETFs have produced substantial negative returns and volatility due to short term “overreaction”. Oil prices have fallen through the floor, food has become more expensive and supply chains

have been disrupted with increased costs. Governments will need to recoup lost tax revenue and increase borrowing to keep some economies afloat. Inflation is likely to rear its head, so with cash deposits for the long term returning effectively nil, can these be considered a “safe haven”?

These are the situations that our selected fund managers have to consider. Fortunately they have massive resources available to help them. Who and what are going to be the investments for the future based on a long term view? Where are opportunities going to occur? Who or what are going to be the winners and losers? The fund managers we use are all asking the same questions and provide some hope for the future. Humankind is very efficient at adapting to changes enforced on them. By mixing a variety of managers one can add balance to a portfolio, which many of my clients have benefited from.

Role of the Financial Adviser
During the last few weeks, when face to face meetings were impossible, I regularly kept in contact with my clients via phone calls and numerous video clips that tried to make them smile. I also provided them with current valuations and updates for the variety of portfolios that they held with me. Sometimes these are complex affairs, or may need a simple explanation. I have also assisted, when required, when there were changes in personal circumstances.

But we are social animals and I have missed the face to face meetings, which in my view makes a big difference compared to talking via telephone or video call. Please feel free to contact me for a coffee and a no obligation personal review on anything financial that may be concerning you at this time.

Investing for the long term

By Andrea Glover
This article is published on: 1st May 2020

01.05.20

The coronavirus pandemic is having a huge impact on our daily lives, but for many readers there is also an impact on their pension and investment funds due to extreme volatility in the financial markets and global economic disruption.

We asked Andrea Glover and Tony Delvalle from The Spectrum IFA Group about their thoughts on the current market conditions and the general reaction that they have seen from their own clients.

Andrea explained, “Financial markets don’t like bad news; the current coronavirus outbreak and the oil crisis that reared its head in early March are unfortunately no exception to that rule. We are all aware of the impact such events have on stock markets and although downturns are not unusual, they can be very unsettling. In these situations, it can be natural to consider taking some sort of action, but at times like this, often the best plan is to do nothing at all – particularly when you are investing for the longer term.”

Tony explained further, “It’s important to take a long term view when investing. An investment plan established during more settled times should not be abandoned when there is a market downturn. We keep up to date with the fund managers who are monitoring the markets to ensure the investments are protected as best they can be and grow over the longer term. In times like these, they focus on valuations, investment processes and look to buy more assets at attractive prices and with the appropriate risk for clients.”

Andrea went onto say, “No-one can say for sure how long this downturn will last, as we also have the US presidential elections and the end of the BREXIT transition period to come. We would be naive not to expect some further twists and turns in the short term, but we can look at what’s happened before when faced with global economic, social and political challenges. History tells us that the global stock markets weathered all of these well, with markets recovering over the longer term.”

Tony commented, “We have made sure that we have contacted every one of our clients during this time, to talk through the impact of the current situation. There has been a mixed reaction ranging from clients with further funds wanting to invest, in what they see as an opportune time, to other clients cancelling regular withdrawals so as not to compound any short-term losses. Each client has individual needs, aspirations and attitude to risk and it’s our role to understand this from the outset, as it is fundamental to the advice that we give.

Andrea summarised, “As our clients invest over the longer term, we enjoy long term relationships with them and they have really appreciated the contact, as obviously communication is key in a time like this. It can really help clients through this unsettling period when, understandably, some will be nervous about their pensions and investments. It’s our fundamental responsibility to support our clients through this bumpy ride, providing them with the information and reassurance that they need. ”

Andrea and Tony are fully operational, working from home and are available for calls and video conference during the confinement period.

Central Banks in Italy

By Andrew Lawford
This article is published on: 29th April 2020

29.04.20

Dear All

There is but one topic of conversation in these strange times, and as the crisis unfolds I decided it was worthwhile looking at how the Italian government is responding and considering where we might be heading.

I have decided to produce a pre-recorded webinar in order to provide you with some useful information on the support available to businesses and have even tried to bring a modicum of humour into the arcane world of central banks and economic policies.

Please see the link below for my latest (in truth, my first) webinar.

How long do you wait for things to improve?

By John Hayward
This article is published on: 27th April 2020

27.04.20

16th March 2020 FTSE 100 – 4898.79
24th April 2020 FTSE 100 – 5750.94
Up 17.39%

History has taught that after disasters there are recoveries. Covid-19 may well be around forever, but there will be controls. Some companies will fall victim, but others will survive and be profitable. We can help you be part of that success. Waiting for Covid-19 to go away before investing could result in lost growth and, ultimately, lost income.

Stockmarkets tend to be ahead of public sentiment and often drive how people feel. Whether the overall recovery pattern is a “V” or a “U” or even a “W” is in some ways irrelevant if you have a medium to long term (5+ years) window. I often hear people saying, “I might not be around in 5 years”. This may be true, but for most people there is more chance of being alive in 5 years than not. Even if one doesn’t survive the next 5 years, we can organise finances so that the survivors are no worse off. Not investing guarantees no growth and capital loss in real terms when allowing for inflation.

Relying on your bank to keep your money safe my not be the iron clad guarantee you perceive it to be.

Careful investing with quality management has proven beneficial for many people in the past. Looking for the quick big buck has often benefitted everybody other than the client. Let us review what you have so that you are part of the recovery and that you don´t feel upset in 3 or 4 years’ time because you missed out on an opportunity.

Contact me now and I will be happy to arrange a phone or video meeting.

Can we learn from the past?

By Jeremy Ferguson
This article is published on: 24th April 2020

24.04.20

Long periods of growth in the world, followed by a creeping in of greed, have normally caused previous stock market ‘tumbles’. This time, however, something completely unprecedented has caused it, wiping large fortunes from people’s pensions and savings, for the short term at least.

This latest situation is another great example of the fact that no one really knows what lurks around the corner. Investment managers may be clever people, but it’s simply impossible to accurately predict the timings of markets taking a tumble when events such as this take place.

‘Investing is for the medium to long term’ is something you will always hear about from people like myself. If you have a time horizon that’s very short, it’s normally fraught with danger; investments need time for you to reap their rewards. So my question is, how has the world faired on this front over the last century, and what we can learn from the past?

The first ‘event’ was the Great Depression in the US, which started in the late 1920’s. What caused it?

The early part of the decade was full of exuberance, people borrowing money to buy cars, new houses, and even borrowing to make investments in the new world of the stock market.

Everyone was doing so well, then the whole thing fell apart and nearly 13% was wiped off stock market values. For those people who had borrowed heavily to invest, it was enough to wipe them out. They lost everything, as they couldn’t repay their debts, and then followed the Great Depression. This lasted roughly 12 years until the massive manufacturing effort of WWII kick started the recovery.

Next up, after many years of growth following the end of World War II, was the famous 1987 crash. This was the largest fall in stock market values at that point in history, with a 23% fall. So what caused this? It was similar to the 1929 crash, with the addition of the speed at which people could trade shares in the modern world.

People were borrowing money, leveraging investments with the money, and then things started to go wrong. This time fear took over, with panic selling ensuing, and people lost fortunes very quickly. At that point it was the single biggest one day fall in history.

This was then followed by a 12 year recovery period, with everything being a little more controlled, until the Dot-Com bubble started to inflate. It was a frenzy of over valued companies,

people buying shares they would never have normally bought. It was all so easy to make money. Everyone was involved. Greed fevered a frenzy of madness! Then it all fell apart. The bursting of the Dot-Com bubble in 1999/2000 pushed stock markets down 23% again, but many shares fell almost 100% in value.

And off we went again… over the next 8 years, behind the scenes there was the growing greed that always seems to be lurking. Easy borrowings, people buying houses they couldn’t really afford, remortgaging the ones they had to buy more ‘things’. Banks were selling on loans to other banks.
Easy money was everywhere, seemingly fuelled by greed again. And then, you guessed it, bang! The start of the 2008 Financial crisis as it became known. The American banking system almost collapsed entirely. Never before had greed almost toppled a country. 12 years of recovery followed (sound familiar?) and 2020 is the next focal point! What more is there to say? Another large ‘tumble’ in values again.

So where am I going with this? Every time this has happened in the markets before, afterwards there ensues a protracted period of recovery and growth. The important thing is the ‘line’ keeps going up, albeit in a rather rugged manner.

The below graph is an example of 50 years growth of the 500 largest companies in the US up to the 2008 crisis. It is all over the place, but if you were invested for the medium to long term, the ‘line’ goes up and up, which is why people invest their hard earned pensions and savings. To profit!

This recovery is going to be tough, and in a new and changed world. It will come from companies that are agile, well financed with flexible long term objectives, and who are able to adapt quickly to the ever changing world.

Never has this been so obvious as it is now. If you have money invested, make sure as best you can it is exposed to investments that are most likely to be part of the recovery. A recovery that history has taught us always happened in the past.

Lockdown is a great opportunity to dig out your files to see what you are invested in, and if you need any assistance or a second opinion, I am happy to help. I can be contacted at :

Jeremy Ferguson
The Spectrum IFA Group
Sotogrande, 11310, Spain
Office: + 0034 956 794409
Mobile: + 34 670 216 229

jeremy.ferguson@spectrum-ifa.com
spectrum-ifa.com

Are you staying informed?

By Gareth Horsfall
This article is published on: 23rd April 2020

23.04.20

What is your barometer for political talk? Where do you go to get informed? I think most people would say that polls are a useful, if often wrong, source of information, then there are the International Monetary Fund reports, the European central bank forecasts, newspapers, economic reports, financial institution analyses (which are basically economic reports) etc. I worked out some time ago that most of these were self serving and although some of that information is useful it shouldn’t ever be a real gauge for what the average man on the street is really thinking or doing.

For me, I get that information some where else….mercato Trionfale in Rome where I do my weekly food shop. I find it a hub of differing opinions and characters that all have something to say on the state of the country, world politics and the health of their country. OK, I admit it is probably not quite as well reseached as the other methods mentioned above, but I do find it gives a different perspective on what people are thinking.

Pension Transfer from the EU Institutions

However, whilst writing this I stand humbled because I attended a webinar on the state of the EU, which I will write about for you here. The webinar was hosted by a large Assurance company called Utmost and they had as their

guest speaker a man named Ashoka Mody. I openly admit I had never heard of him before but he has a string of book titles to his name, a career at the World Bank and also influence in the EU’s bailout of Ireland in 2009. The reason I stand humbled is because he was a pretty straight talking economist, it would seem. He had very strong opnions on what is likely to happen in the EU as a result of the Covid 19 crisis and particularly how the crisis will develop in Italy, which is, of course, very important to a lot of us.

So without further ado, here goes my summary that webinar and the evolving situation and some of the thinking about the future of ‘Il bel paese’ and the European Union.

Where is the money going to come from?

Let’s start by saying that whatever predictions are currently being made about the financing needs from the effects of COVID-19, the true reality is that it is likely to be a hell of a lot more than we think. It is likely that the global effects of COVID-19 are going to be felt long after the virus disappears (assuming it doesn’t make a return in the winter) and to return to normal the best estimates are that we will need at least 2 years for travel, business and supply chain to return to pre virus levels

At the moment there is little point looking much further than 2020 as this is so unprecedented no-one really has any answers, but the realistic thinking at the moment is that the cost for BOTH Italy and Spain will be upwards of 20-25% of their GDP in 2020. In monetary terms that is a potential €500 billion black hole in the finances of Italy and about the same for Spain.

To look at the viability of filling this hole, we have to turn to the EU. Just last week they announced a potential €500 billion recovery package which, as we can see, does not even come close to the potential needs of the countries worst affected by the virus. So, what do the EU members states really need from the EU now? The answer is not a financing solution because they will never agree a package big enough as we will look at below. What the EU needs now is a political revolution and who would like to place any bets on that happening?

Normalcy: the condition of being normal; the state of being usual, typical, or expected

I am sure you, like me, have concerns about how the EU is going to deal with this and how Italy will extract itself from this mess, but my more immediate preoccupation is what happens to all the small businesses, restaurants, bars, pubs, shops, etc. How are they going to survive this? And I don’t just mean the lockdown period, because any extended set of conditions put on a return to normalcy which will, in turn, have a further damaging effect on the supply chain. The best economic forecasts predict a return to growth for most countries in Q4 2020, but the likelihood is that growth will only return, after a severe contraction for all of 2020 and a return to growth in the first quarter of 2021.

Cogs and Wheels

We have to imagine that the whole world economy is a machine which is comprised of cogs and wheels and for the machine to keep working all the cogs and wheels must keep moving. If one slows then it inevitably has a slowing effect on the whole machine. Not only, but if we imagine the supply chain of a restaurant for example (I choose this because there may be social distancing rules applied to restaurants when they reopen) and

assume that they can only open initially at the capacity of 30-35% of their pre virus levels, then effectively that slows the whole supply chain down to 30% as well. It is not correct to say that it will affect only the restaurants, but also the lavanderia that cleans their table cloths, the food suppliers, the deliveries of detergents, the wine consumption etc. This affect of an extended return to normalcy could be the difference between many businesses reopening and staying permanently closed.

We can extend this thinking globally as well based on different countries coming out of lockdown at different times. If we think about global trade in it’s most basic defintion it is an exchange of goods. A buyer finds a seller and they make an exchange. But, if in the case of Italy, it comes out of lockdown and businesses start again, will they be able to find buyers, or even sellers of their goods and services if other countries in the world, the USA, the UK, Russia, China etc have continued restrictions in place themselves and they can longer trade in the way they did before?

The system is a machine of cogs and wheels which are all inter-dependant on one another. When the wheels stop turning it affects the whole machine.

The ripple effects in the EU?

The first thing to remember about the eurozone economies is that coming into this period, nearly all the eurozone countries were in or near recession.

Italy has been in a low growth, low inflation cycle for about the last 30 years. This crisis is expected to cause respective contractions to the economies of Italy and Germany of -9.1% in 2020 and -7% followed by growth in 2021 of +4.8% and +5.2%. Unfortunately the reality is likely to be much worse.

Italys’ national debt to GDP ratio is predicted to rise to 155% and it could very well fall into a persistent deflation spiral. This is very bad for business, the economy and the country as a whole because it will exacerbate the effects of the debt meaning that Italy has to pay even more back to meet it’s debt obligations in world financial markets, meaning less investment in infrastructure schools, hospitals, and public services. Could we see even more forced privatisation of public utilities and services?

In short this is a very bad situation!

As I also explained above, the effects will not only be isolated to Italy and Spain, but the rest of the EU. For example, French banks have lent approximately €300 billion to Italian banks in recent years. Italian banks are almost inevitably going to wobble after this crisis and we might have to expect some bank failures (the subject of my next E-zine). But, if they default on their obligations, what will be the ripple effect on French banks? And French banks are not the only banks that have lent to Italian banks in recent years. Also, Greek, German, Spanish, Portuguese…can you see the trend?

So how will the EU deal with this crisis?

The short answer is don’t expect anything from the EU. It is likely that we will see a new idea almost every day in the press but none of these will solve the problem because one the single biggest failure of the EU project. No political alignment. We cannot fix a financial solution without first having a political solution, because any political solution ultimately means that there will be a fiscal transfer from one country in the EU to another, and neither the Dutch nor the Germans are willing to take that risk.

The European central bank already owns 23% of Italian government debt and to bear the cost of the Covid 19 breakout it would need to purchase another 25%, meaning that the ECB would be holding nearly 50% of Italian government debt. If we remove the morally right thing to do for a moment, it is perfectly understandable that the Germans and Dutch would

not want to be on the hook for this amount of debt should Italy fail to pay its debt obligations in the future, because of its inability to manage its economy.

National interest will always come first, over EU solidarity. Let’s bear in mind that Germany is also going to have to apply it’s own fiscal stimulus and if EU bonds were created then that would mean a transfer of approximately €200-300 billion euros of government debt transfer from Italy to Germany alone. It might be the morally correct thing to do, but is it the practical thing to do?. Is it right that other EU states should shoulder the burden of debt from less efficient Southern European states?

A quick look at history

You may think that these are historically unprecedented poltical times, but you would be wrong. We only need to look at the USA to see what happens when no political union is in place:
Between 1776 and 1789 the US was like Europe is today. It was a group of federal states that all operated their own finances and budgets. This was also the time of the War of Independence from Great Britain. In 1788 a currency union was formed and the US dollar was granted as the common currency across the USA, allowing them to spend without the worry of exchange rates. Following the currency union a federal government was formed in 1789. At this point the federal government now had a right to tax the nation. However, this led to a fractures between individual states, principally those in the north and those in the south and lead to the American civil war in 1861 – 1865.

So there we have an example of a similar situation as that of the EU, but with one major difference: The EU doesn’t have a federal government in place and without a federal government, (but a currency union), then the central bank (the ECB in the case of the EU) does not have the authority to bail out the individual member states in the time of need. In other words the central bank cannot play it’s role of being a lender of last resort. Herein lies the problem.

In the USA, as we have already seen in past weeks, they will essentially ask the Federal Bank to print as much money as is required to bailout the nation. If they lend to any institution, municpality or corporation and that entity fails to pay their debt obligations then the

taxpayer will bear the burden for that debt and it will be added to the governments existing debt obligations, which they can then, over time, work to payback or erode through inflationary measures.

taly, as per all EU member states, have no lender of last resort, (independent central bank) to which they can turn to bear the cost of the measures introduced during the Covid 19 outbreak.

So where do we go from here?

Well, it is quite clear that this is going to swiftly move from a health crisis to an economic crisis and then even more quickly to a political crisis.

There seems to be no political will in the EU to create EU Bonds to alleviate the burden on Southern European states who were most severly affected by Covid 19. The only solution being offered at the moment is to extend the European Stability Mechanism to Italy, Spain and other affected states which is ( without going into details) an offer of loans at low to zero interest rates, but which must be paid back and with conditions attached. This is something which Italy is going to try hard to fight against. This isn’t a financial crisis but a health crisis and they believe, and I am with them despite the financial and political consequences, that the EU must bear the burden of the additional debt created because of this crisis. Italy does not want to take loans with conditions attached because it is essentially the same financial treatment as that imposed on Greece in 2010. The only outcome from that was complete financial hardship and a failing economy. Italy is, obviously, keen to avoid the same fate as is Spain.

So that leads us nicely to the term which we are likely to see in the press in the coming weeks and years ahead: QUITALY.

Is Italy going to decide to do a Brexit and leave the EU. Before any Brits, like myself, who have taken citizenship in recent years, start to panic about the possibility of Italy leaving the EU as well, it should be noted that the Italian constitution would prevent a hasty and

quick action, (They couldn’t do a Brexit!!) and even if they were to hold a referendum on the matter it would take years of negotiation within the warring Camera dei Deputati and Senato to even arrive at a referendum.

So we have a long way to go yet, but one thing is clear. Political opinion is changing in Italy. In recent surveys 42% of Italians said that they didn’t want to leave the EU, but an equal percentage said that they would want to. 50% of Italians said that they did not want to take any money from the European Stability mechanism if it came with any conditions attached, but conditionality will be key to the future of the EU, and the economic health of Italy.

As you might imagine at this time, this is stoking more populist revolt and Matteo Salvini is now number 1 in the polls. The Frattelli D’Italia led by Giorgia Melloni ( who is a far right party allied with Salvini’s, La Lega) is also polling well and her ratings are rising fast. It is not beyond imagination that when the Covid virus passes, a political crisis will quickly ensue, Conte and the M5S coalition will hold on to power by a thread but a Salvini / Melloni coalition could be very quickly ushered into power in the not so distant future. Prepare yourselves!! I can only add that my conversations with Italian friends, people I chat to at the market and with some clients has turned from being very EU positive to negative. One of my clients probably hit the nail on the head when he said, “if the EU cannot get their finger out on this one, then I can’t really see the point of a politically unified EU anymore and it should return to it’s roots and become merely a trading block, with freedom of movement). I am inclined to agree.

What can we expect?

The Eurogroup [the group of EU finance ministers] is meeting on Thursday 23rd April to discuss the future. Conte will be meeting with them to try and negotitate a good financing outcome for Italy.

The likelihood is that the EU will do what they are good at and kick the problem into the long grass. They will not provide any concrete solution, which will throw Italy and possibly Spain into a spiral of recession, deflation, more political infighting and economic hardship. The Eurogroup only has €500 billion euros at it’s disposal to provide unemployment insurance, economic stimulus, and the fight the Covid 19 virus across the EU. It is nowhere close to the amount required. The ball park figure would be closer to a € 1trillion. The sad fact is that the European Central Bank could print € 1trillion euros, if only it had the mandate to do so from all EU member states.

In truth, Germany will likely have the last say. Brexit has already left a funding hole of approximately €60 billion in the EU budget and so the logical conclusion is that Ms Merkel will give the problem the kiss of death by requesting that the issue of funding is placed in the EU budget and each country will be left to fight it out with other member states as to who pays what and when. In others words it will fall into the bureaucracy of the EU. The problems will persist in Italy and economic hardship will worsen.

So what does this mean for our money

Well, to try and leave this E-zine on a positive note for investors, at least, we can be thankful that there is a whole world out there in which we can invest and whilst Italy likely sees hardship, other countries will exit this crisis and proper. One country that springs to mind is China. So for all our concerns about the country that we live in, we shouldn’t worry too much about our money. I can’t say for sure when stock markets will recover fully. We may be waiting until the end of this year at the very earliest, but they will and with a well managed, diversified portfolio with good oversight, then your portfolio will recover as well. The economics will play out over a much longer period. One upside for currencies is that it could weaken the Euro which would make those who have assets in USD or GBP, for example, worth a lot more. Maybe a return to the heady days of 1:45 GBP to 1 €?

All I can say that it is all to play for. In the meantime, I will be taking a closer look at Italian banks in my next E-zine as they could be a huge risk to use, and to financial markets in the months and years ahead.

Longer Term Perspective

By Chris Webb
This article is published on: 22nd April 2020

22.04.20

One of my favourite songs is, ‘The Show Must Go On’ by Queen, arguably one of the best bands ever. How apt the opening lines sound now. It’s day 41 of our lockdown as we bunkered down on the 11th of March, a little earlier than the national lockdown came into force and I wont lie and pretend its been plain sailing. Having two children home schooling and trying to run our businesses from home at the same time has been quite a challenge, but the overriding feeling has been and still is that the show must go on…

Emotionally this might just be the toughest period that we all have to go through. Every day is a new challenge. But as we all know, we can’t just sit and stare at the walls and feel sorry for ourselves.

All of us will have had different emotional barriers to face. They might be the feeling of confinement and reduced work capabilities; they might be a feeling of panic and anxiety trying to deal with the unknown situation we are in; they could be dealing directly with this virus, either having caught it themselves or having a loved one infected.

It doesn’t matter what the factor is, it’s guaranteed that we have all been dealing with emotions far more during the last 5/6 weeks than we have ever had.

On top of dealing with our own family’s emotions, I am having daily conversations with my clients about their investments during this period and the emotional impact it is having. All it takes is to watch the news channel to clearly see how volatile the markets have been. This is an additional emotional crisis for some, particularly if they aren’t experienced investors.

All my clients will know that I talk a lot about the different hats you need to wear when investing in the markets. There is the investment hat and the emotional hat. The investment hat is the exciting one that drives your investment decisions; the emotional hat is the one that pulls you back a little and makes you consider your choices. In my opinion the emotional hat is the most important one. It only lets you make decisions that you are happy with and have thought through.

Here are my top tips for dealing with the emotional side of investing; hopefully it will help steer you through the coming weeks.

The Rational, Irrational and Emotional Struggle
It is a challenge to look beyond the short-term variances and focus on the long-term averages.

The greatest challenge may be in deciding to stay invested during a volatile market and a time of low consumer confidence. History has shown us that it is important to stay invested in good and bad market environments.

During periods of high consumer confidence stock prices peak and during periods of low consumer confidence stock prices can come under pressure. Historically, returns trended in the opposite direction of past consumer confidence data. When confidence is low it has been the time to buy or hold.

Of course, no one can predict the bottom or guarantee future returns. But as history has shown, the best decision may be to stay invested even during volatile markets.

Declines May Present Opportunities
An emotional roller coaster ride is especially nerve-racking during a decline. However, the best opportunity to make money may be when stock prices are low. Buying low and selling high has always been one of the basic rules of investing and building wealth. Yet during these emotional and challenging times it is easy to be fearful and/or negative, so let’s turn to the wise advice of one of the world’s best investors, the late Sir John Templeton:

“Don’t be fearful or negative too often. For 100 years optimists have carried the day in U.S. stocks. Even in the dark ’70s, many professional money managers—and many individual investors too—made money in stocks, especially those of smaller companies…There will, of course, be corrections, perhaps even crashes. But, over time, our studies indicate stocks do go up, up and up”

Watching from the Sidelines May Cost You
When markets become volatile, a lot of people try to guess when stocks will bottom out. In the meantime, they often park their investments in cash.

But just as many investors are slow to recognize a retreating stock market, many also fail to see an upward trend in the market until after they have missed opportunities for gains. Missing out on these opportunities can take a big bite out of your returns.

Euro / Dollar Cost Averaging Makes It Easier to Cope with Volatility
Most people are quick to agree that volatile markets present buying opportunities for investors with a long-term horizon. But mustering the discipline to make purchases during a volatile market can be difficult. You can’t help wondering, “Is this really the right time to buy?”

Euro / Dollar cost averaging can help reduce anxiety about the investment process. Simply put, Euro / Dollar cost averaging is committing a fixed amount of money at regular intervals to an investment. You buy more shares when prices are low and fewer shares when prices are high, and over time, your average cost per share may be less than the average price per share. Euro / Dollar cost averaging involves a continuous, disciplined investment in fund shares, regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low-price levels or changing economic conditions. Such a plan does not assure a profit and does not protect against loss in a declining market.

Now May Be a Great Time for a Portfolio Check Up
Is your portfolio as diversified as you think it is? Meet with me to find out. Your portfolio’s weightings in different asset classes may shift over time as one investment performs better or worse than another. Together we can re-examine your portfolio to see if you are properly diversified. You can also determine whether your current portfolio mix is still a suitable match with your goals and risk tolerance.

Tune Out the Noise and Gain a Longer-Term Perspective
Numerous television stations and websites are dedicated to reporting investment news 24 hours a day, seven days a week. What’s more, there are almost too many financial publications and websites to count. While the media provide a valuable service, they typically offer a very short-term outlook. To put your own investment plan in a longer-term perspective and bolster your confidence, you may want to look at how different types of portfolios have performed over time. Interestingly, while stocks may be more volatile, they’ve still outperformed income-oriented investments (such as bonds) over longer time periods.

Believe Your Beliefs and Doubt Your Doubts
There are no real secrets to managing volatility. Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio. But sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you may begin doubting your beliefs and believing your doubts, which can lead to short-term moves that divert you from your long-term goals. To keep from falling into this trap, call me before making any changes to your portfolio So that’s my tips for fighting your way through the emotional impact of investing. I hope it is beneficial to you. The main point to take away from this is that THE SHOW MUST GO ON.

Stay calm, stay invested, don’t make crazy rash decisions and in a short time, this will be a blip in the past. If you want to discuss the risk element or have a second opinion on your investments, I am happy to conduct an initial consultation and present any recommendations free of charge. You can get in touch using the contact details below.

Don’t delay your financial plans. For planning, yesterday is better than today, which is better than tomorrow

Life in Lockdown

By Charles Hutchinson
This article is published on: 14th April 2020

Here we are starting the 5th week of lockdown in the Costa del Sol. What a surreal world it is compared to what we have known all our lives. I would like to think it is good for us and our moral fibre. Certainly it is morphing into a much more pleasant environment to the mess mankind was creating until the virus came along. Depending on your take on things, this is either nature seeking to redress our mishandling of this fragile planet, or it is the force we call God taking action to prevent our mass suicide. Of course, it can be argued they are both one and the same, but that discussion is for another time. I and my wife are very lucky, as is my son and his family. We live in houses with space and gardens. We are particularly lucky as we have 1.3 hectares of land and are at least 300 meters from the nearest lone house. We have dogs and can take them out for walks at will, on or off our land, and nearly always meet no one. We have fabulous views and my wife is catching up with all the stuff in the garden for which she normally does not have the time. We both work from home anyway and so our work regime has not altered.

Some of my clients in similar circumstances are also not enduring too bad a time, but the ones I feel for are those clients of mine who live alone in small apartments in urban areas and have no dogs. These are the ones I try to stay in touch with most. I am calm in the knowledge that their money is safe because they are with highly reputable companies and investment managers. And it is all about when the markets will begin to recover. It is their wellbeing that concerns me most and part of that is the reassurance they need that their security is not threatened in the long term.

Little Estepona has only one case so far (so lucky), it’s like a ghost town when I go down for our weekly shop. No one on the streets and the police have check points to enquire to where you are going and why and from where you have come.

You have to carry evidence on you to show what you are doing. It’s all good stuff to keep this dreadful thing outside of our city limits. But it does feel very bizarre. Telecommunications and web communications have replaced face to face and touchy feely, but that’s tolerable. The peace and quiet is incredible, you hear so much more now without the sometimes distant murmur of traffic, fireworks, helicopters and the boy racers roaring up and down our mountain road across the valley. The nightingales have arrived which is so beautiful and you can hear them even louder than before. The dawn chorus is almost deafening.

I have to say that the Spanish are bearing up extremely well. When you consider that their life is all about being out and about, socialising, meeting, kissing and hugging each other, sitting out in cafés with friends and family and just enjoying the social interaction, making huge amounts of noise, so much so that they design their homes, not for entertaining, but for spending as little time in them as possible. So now they are imprisoned for an indeterminate sentence, where they cannot go out except to buy essential food once a day, directly there and back, no meeting or touching people and if meeting someone by mistake, it must be from a distance. At the end of all this, we reckon there will be a spike in suicides, divorces and births. Our son Simon and family in Luxembourg, in the same lockdown, go to virtual drinks and dinner parties in the evenings and weekends with friends in the area. He showed us a photo of him getting ready for a dinner party. He was wearing a winged collar, black tie and dinner jacket and shorts and slippers (they can’t see the bottom half!). We’ve started them too; we have about half a dozen friends for drinks and it is hugely enjoyable. We use Zoom so that you can see everyone at the same time and chat together.

Rhona, my wife, has joined Gareth Malone’s virtual choir – I wonder if you have heard about it? The Great British Home Chorus. So far he has more than 110,000 people from all over the English speaking globe and she rehearses with him in the early evening. It is hilarious sometimes hearing these extraordinary howls from another part of the house or outside, my not hearing or seeing the great teacher conducting her.

So, what now? We really don’t know – anything could happen – gradual eradication or a resurgence of the virus? We know here there has been a partial release of lockdown for some workers, especially those who cannot work from home. There is a natural conflict between those who want to continue the lockdown to protect the health of the population and the health service and those who want to protect the economy, jobs and companies. It is very difficult to navigate a sensible course between the two. The global stock markets, which always try to predict the future (not the present nor the past), have already come off bottom with a double bounce nearly a month ago. Now this rise seems sustained for the moment or is this another dead cat bounce? What is obvious is that the markets want to get going again and advantage is being taken of these low levels by many. Those who have cash should think seriously about getting in at these levels, even if drip feeding. Some markets are already up between 20% – 30% from bottom and the potential is still there for a very healthy start to an investment, but it is not for the faint hearted. Cash is king no longer and a home has to be found for it. Make a plan, invest for the long term (at least 5 years), diversify your investments (even in multi asset funds alone), choose good investment houses and funds and stick to the plan. You will not go far wrong if you observe these simple rules.
If you would like to discuss this further, do please get in touch by contacting me as per below. I would even like to hear about your lockdown experiences!

Health, Wealth and Happiness

By Victoria Lewis
This article is published on: 12th April 2020

12.04.20

During the current lockdown in France, I have seen a noticeable increase in the number of my clients wishing to review the beneficiaries of their investments. This could have been prompted by the daily depressing news of covid-19 deaths around the world, or it could simply be because of the extra time available to get their financial plans in order – working through the ‘to do’ lists.

Whatever the driver behind these reviews, it is a responsible part of financial planning to think about how and to whom you wish your investments to be distributed after your passing.

Inheritance planning is a key feature of the well documented ‘assurance vie’ in France – a simple and efficient investment vehicle available to French tax residents. In the next article I will remind you of the assurance vie benefits.

For the moment, I will focus on the title of this ezine. As a Financial Advisor, I am clearly not in a position to advise you on health matters. But as it happens, during this covid-19 confinement period, my own personal health has come under review! With the extra time I now have as I am not travelling to see my clients face to face, I have been able to spend 20 mins every morning exercising via an online personal coach. I will to continue this when normal life resumes.

I am, of course, able to help you with your wealth matters; and it does matter. Perhaps during this time of global lockdown, we can all reflect on our financial plans. Should I change my spending habits? Could I afford to retire earlier than planned? How can I stay financially motivated given the financial and economic forecasts? We can all lose focus from time to time, but it’s a financial adviser’s role to help you keep focused and to bring your financial plans back on track.

Please use your spare time constructively – why not contact me for a review, either over the telephone or via a video call. We will discuss many different areas such as life insurance, pensions, savings and investments, inheritance and wills, mortgages and education fees. We do not charge you a fee for our discussions, our follow up work, our regular reviews or our reports and you are under no obligation to follow our advice. Simply put, if you agree with my recommendations and I then arrange for you for example, an assurance vie or a pension, we are then remunerated by the companies we recommended.

When the daily news is worrying, it is understandable to get absorbed about the here and now impact. We are, after all, thinking about things like the latest restrictions, food shopping and how to keep the family occupied. However, when it comes to your financial plans, it is really important to stay focused on your key objectives.

I believe that if you have your health, an abundance of family and friends, a plan for your wealth then happiness will naturally follow.

To discuss further, please contact me on 06 62 50 70 21 or email Victoria.lewis@spectrum-ifa.com

Guardianship for your Children

By Katriona Murray-Platon
This article is published on: 11th April 2020

11.04.20

Being the mother of two small children and the aunty of several more, like many parents, the issue arose quite early of what would happen to my children if something were to happen to my husband and I and what would happen to my sisters’ children should something happen to them. Whilst I don’t need to make a will from an inheritance tax point of view, because I have two children with the same father (my husband) and French law states that my half of our assets would go to my children as bare owners (nu propriétaire) and my husband as beneficiary (usufruitier), I do need to make a will regarding my wishes for my children’s guardian.

The first question is a personal one. Who, in your family or friends, would be best placed to be able to raise your children, in the country you want them to be raised in, in their language, in the way you want them to be raised? Do(es) this person(s) have children of their own? There are a range of different questions that are all particular to your situation. If you intend to appoint someone to be a guardian, then you should talk to them about it and maybe, if possible, talk to your children about it.

The second issue is the legal aspect. There are two ways to appoint a guardian in France. Firstly, you can appoint them in your will, or you could appoint them using a special declaration. Either way a notary needs to be involved. If no guardian is appointed by the parents, under aged children will be put under the protection of the court. A “Family council” will be appointed by the Guardianship Court (Juge des tutelles). This Family Council, made up of a minimum of 4 people, will have the responsibility of appointing a guardian (if one hasn’t already been appointed) who can be a member of the family or someone outside the family. Even if a guardian has been appointed but this person is unable to either adequately care for the child or properly manage the child’s assets, the matter can be referred to the court and another family member can chose another guardian.

If a child loses one parent then it is the other parent who will have parental responsibility. This parent can either care for the child themselves or appoint a guardian, who can be a member of the family or a close friend. If the parent is unable or incapable of looking after the child, then another guardian can be appointed by the court.

The third aspect is the financial aspect. If something were to happen, would the guardian have the financial means to look after the child(ren)? One thing you can do is make sure you have life insurance (called death insurance in France) which will pay out a lump sum and/or an annuity to the children for the rest of their childhood. Often when you purchase a house there is loan insurance that will cover some or part of the value of the house upon death of one or both parents. However, it may not be convenient or possible for the child to be raised in the family home and property as an asset is difficult to manage. Other liquid assets can be kept in bank accounts like Livret As or LLDs, but large lump sums (like the proceeds of a house or the lump sum from insurance upon death) should be placed in an assurance vie in order to protect it from inflation.

Luckily it is uncommon that a young child would lose one or both parents, but it is something that plays in the back of the mind of many parents so it is better having things in place to decide, who, how and with what means someone would look after your child in the best possible way.