After the exuberance of August, markets settled lower in September - with pockets of excess in some well-known and high flying stocks being squeezed out. September was also notable for reaching two milestones that none of us would have ever wished for.
Over the month the number of coronavirus cases reached 35 million and an even less desirable milestone was achieved with the millionth person dying. That is a staggering death toll, close to the entire population of our South Island. The human and economic impact of the pandemic is changing the world. Another major milestone that was reached in the month was the arrival of negative government bond interest rates in New Zealand. At one point during the month, interest rates on New Zealand Government bonds out to five years of maturity were negative.
Coronavirus has fundamentally changed not only the shape of the global economy but it is having widespread impacts on the business environment. This presents difficult questions for companies and investors to grapple with; will the changes we have already seen such as the shift to e-commerce- be sustained, how will customer behaviours alter in the longer run and what second order, and hence harder to spot, impacts might there be.
Answering these questions is hard but those companies that are most dynamic and most able to position for the “new normal” are likely to be the winners. Companies that can’t will, unfortunately, be left behind.
The 2020 Fisher Funds Roadshow
This idea of dynamism is the focus of the 2020 Fisher Funds roadshow. This year the roadshow is going to be held online, yet another reflection of the new world we live in. The good news is it means more of you can attend. There will be two sessions held at 2pm and 7pm on 15 October 2020, you can find out more about the roadshow and register to attend below:
I don’t want to spoil the content but to give you a sense of things we will be covering:
1. The best companies in world have adapted very quickly and embraced change
The coronavirus pandemic means the discussion in every boardroom around the globe has been about adjusting to the post pandemic world. The companies that have embraced change and have pivoted quickly towards new opportunities, strategies and operating rhythms have, fared best. We believe these companies will continue to fare well. Those companies that haven’t embraced change, assuming things will revert to the way they were in the pre pandemic world, are likely to struggle and risk being overtaken by more nimble competitors.
There are a number of companies in our portfolio who have got this right. Amazon.com quickly pivoted to the provision of basics during the early days of US lock downs along the way hiring another 150,000 workers. In Australia Next DC has moved quickly to step up the roll out of new data centres, as demand for cloud computing explodes. Fisher & Paykel Healthcare has been a global leader, ramping up production of its Optiflow nasal high flow therapy and getting it to hospitals in desperate need to help patients with COVID-19.
2. Adjusting portfolios to take advantage of new world
Just as companies need to embrace and adapt to a dynamic environment so do we in the portfolios that we manage on your behalf. This is a considered process; dynamism doesn’t mean frenetic change, but we have made a number of changes both to enhance returns and protect your portfolios.
We positioned portfolios for a continuation of falling interest rates in New Zealand which has added value. We have increased our exposure to international currencies, we think the kiwi dollar is vulnerable to weakness, but it has a side benefit of reducing overall portfolio risk. And we have initiated positions in a number of new companies - Floor and Décor, Heico, and Australian insurance software firm Fineos, for example - using volatile markets to buy at attractive prices. Change, while it can be uncomfortable, does present opportunity.
3. Working closely with our clients to build strategies to succeed
This is also time to carefully think through how you build and manage your own personal wealth. Interest rates have dropped and are expected to head even lower. The means investment solutions, like bank term deposits, that have historically provided attractive returns no longer do. Future returns for other assets like shares and bonds are also likely to be lower than we have enjoyed in the past. This may mean changes are needed to how much we save as we build our wealth, or changes to how we consume in retirement. This may also mean changes to the structure of your portfolios and in our mind-set as investors.
Most importantly it is a time where your advisor can help fashion a strategy that builds towards your long term goals. It’s our job to be there and help you each step of the way.
It will be a really interesting roadshow. I look forward to chatting, or is it e-chatting, to you soon.