February 2020 Update

The supposed key event in January was the UK leaving the EU on the 31st... The bigger global event affecting financial markets is the yet-to-be-named new strain of Coronavirus which threatens to become a global pandemic.

January started with most financial markets delivering solid returns continuing the trend at the end of 2019. However, market trajectories altered after the Coronavirus emanated from Wuhan, a Chinese city the size of London and the capital of Hubei province. Despite this our portfolios suffered only small losses in January and have since recovered.

As China is the second largest global economy accounting for 17% of global GDP, global growth will be dented. The Chinese have responded by injecting $200 billion into the economy and have cut interest rates in order to stimulate the economy. This will likely keep a lid on interest rates in most countries, which should support markets.

Airlines and tourism will be hit... especially in Asia. We have low exposure but we do have some exposure to Japan where tourism, as a consequence of rising Asian consumer wealth, has been a boost.

Oil demand has fallen and the price has dropped by 20% since the start of the outbreak. BP warned on Tuesday that Coronavirus could wipe off 40% of growth in global oil demand this year, which will add more pressure to the company which simultaneously reported a 25% drop in its fourth quarter earnings. This has been typical across the sector, a sector which, we are pleased to report, we have limited exposure to.

Given the more muted outlook for global economic activity, low-risk assets such
as government bonds have performed well. However, their yields have moved even lower from unattractive to extremely unattractive so we remain bystanders in this asset class.

It's not all bad news...

In the cleantech sector, which we do have exposure to, Tesla's share price has gone from $200 per share to $735 since June 2019... Cleantech, Environment and Sustainability remain key themes in our portfolios whilst we continue to shun old technologies such oil and gas.



JANUARY PERFORMANCE

Featherstone Steady Growth (0.61%)

Featherstone Sensible Growth (0.48%)

Featherstone Serious Growth (0.10%)



JANUARY PORTFOLIO CHANGES

A fund selection change has led to a reduction in Absolute Return strategies in favour of UK Equities, and High Yield Debt for the Steady Growth and Sensible Growth portfolios in particular.

We have sold the Odey European Focus Absolute Return Fund formerly held in the Steady Growth and Sensible Growth portfolios. Despite the occasional success for individual stock names within this fund, its general thesis, a premise of an increasing cost of capital, has been overshadowed by the ongoing actions of central banks to maintain a low interest rates and abundant liquidity.

As always, if you have any questions then please get in touch and let us know if you have not yet used your ISA or capital gains allowances and you would like us to.