Our weekly newsletter for the week commencing 30th March

In times of adversity you find out an individual’s true character, over the course of this pandemic we have found most individuals, companies and governments’ true character to be supportive, accountable and doing what is right for our society.

We’d like to take a minute to appreciate the companies who have supported the coronavirus efforts and evidence some of the great work being done.

NHS

The NHS and their staff of incredibly brave and hard-working individuals who have worked tirelessly to fight against the coronavirus and the impacts it is having on our lives.

The Hut Group

This week The Hut Group announced a pledge of £10Mn of COVID-19 aid to Manchester and other international markets focusing on vulnerable communities, key workers and emergency services.

Ineos

Ineos has delivered on their promise to begin UK production of one million bottles of hand sanitiser per month, providing their solution for free to the NHS.

Ventilator challenge UK consortium

This group includes Airbus, BAE Systems, Rolls-Royce, Unilever and several other companies that have come together to produce medical ventilators for the UK.

PwC

PwC charitable foundation is donating $2.85m towards feeding low-income households, producing protective equipment for health workers and support for those most at-risk.

There are countless other companies who are supporting the coronavirus efforts, and we appreciate them all, please feel free to inform us of other great companies out there in the UK and globally.

Kindest regards,

Aidan Briggs
Head of Research

Market Update from our Chief Investment Officer, Matthew Singleton

This week major financial markets have been less volatile and in addition, have seen much lower levels of volume.

This would indicate 2 things.

Firstly, anyone who was a short-term investor or that was panicked into selling “at any price” have now exited their positions with financial markets.

Secondly, fund managers/investment banks will have been rebalancing their portfolios attempting to ensure the fund/portfolio is well-positioned to recover well whenever the market recovery accelerates.

Obviously, on the second point, there will be a variety of views on how funds/portfolios should be repositioned.

From what I have read/listened to, there are two main strategies on fund/portfolio rebalancing.

• Lowering fixed income exposure to increase equity exposure. Some of the cash raised will be awaiting further developments before entering the equity markets.
• Upgrading quality. This rebalancing strategy will focus on individual companies and selling companies that are deemed to be most affected by coronavirus.

Our view is that the FTSE100 will trade within the range of 5200-5600 for the next 2-3 weeks until further developments are known.

One other thing to note is the Oil price.

Yesterday Donald Trump indicated via a tweet that Saudi Arabia/Russia would cut production by 10-15 million barrels per day. This caused the oil price to rise by over 20% although, as there has been no confirmation on this deal the oil price has drifted down circa 5% today.

If this is confirmed, it would be good news for the likes of Royal Dutch Shell & BP who are the largest and 6^th largest companies by value within the FTSE100.

Major Market Movements Week to date.

Matthew Singleton
CIO

The thoughts and opinions of our Managing Director, Mark Parello.

President Trump is having to take the pandemic more seriously and has extended national social distancing until April 30^th. Initially, he was hoping to open the country again for Easter. Markets have responded positively to this action.

As mentioned in our first update, governments must address 2 major requirements:

1. Safeguard our lives
2. Safeguard our livelihood

Any action taken by governments to address these requirements is proving positive for markets. There is also now more serious talk of finding a vaccine, with Johnson & Johnson (J&J) suggesting they may have a vaccine, which will be ready by early next year, and Moderna, a Boston based biotech business whose vaccine started human testing in March.

While there are still many variables to consider (a second wave of infections, further government stimuli and policies), should Moderna or J&J find a vaccine for COVID-19, the financial markets, being forward looking, will likely recover strongly.

I had a number of people reply to our last update with questions regarding our thoughts on which sectors will fare best and which sectors to avoid as a result of the pandemic.

All sectors have been affected by COVID-19 in recent weeks but to varying degrees. Since the crisis began, the sectors most affected have been Commercial aerospace, Oil & gas, Air & travel, Banks, Real Estate, and Automotive. It is these businesses which will also likely take longest to recover.

Those affected least, and therefore taking less time to recover, or which may benefit from the pandemic will likely be Advanced electronics, Medical technology, Telecoms, Media, Personal and office goods, healthcare supplies & distributions, Pharma, High tech, Logistics, online retail and apparel.

The reasons for the above sector spread assumes we will be operating from home over the period of 6 weeks or more. According to neurolinguistic programming (NLP), it takes 28 days to make or break a habit. Post COVID-19 I believe the world will operate differently and our new habits will reflect, which sectors will do well.

For example, we will be used to working from home (therefore travelling less), having set up home offices and using tech and telecoms to communicate. We will be saving time not travelling (and therefore not using the car or petrol), which will mean we probably use media more and most of us will be used to ordering online. Many of us will have bought gym equipment so we can stay healthy during isolation etc, etc.

If you have any questions regarding the above or generally, we would love to hear from you and we will look to answer as many questions as we can in our updates.

Thank you and stay safe,

Mark Parello
Managing Director

Thank you for taking time out of your day to read our newsletter, should you have any questions, please feel free to contact us.

Kindest regards,

King Street Wealth Management Family