My apologies for not keeping you more regularly updated recently, but aside of the tragic death from Covid of one of my best friends, it has been a case of one step forward and one backwards with investment markets during February, with little real progression or certainty.
Some of the volatility has been as a result of market-makers taking short term profits from their portfolios and not really allowing any progression within many sectors. However within the past week, both within the UK and Overseas, we have seen an indication as to the fact that higher inflation rates are expected as economies start to re-open again later this year. The sign for this has been a sharp increase in yields within ‘safer’ investment sectors such as the Government and Corporate Bond marketplace and a move away from shares. The consequence of this has been to see a fall in share values, particularly within the more niche sectors such as technology and small to medium-sized companies, due to the fact many of these companies carry a large debt burden (not least as a result of limited trading conditions over the past year) and are vulnerable to the consequences of inflationary increases; because with higher inflation comes higher interest rates and so the cost of servicing company debt increases!
My personal view, for what it is worth, is that whilst many of these companies may carry a bigger debt burden should interest rates rise, this must be balanced against the prospect of much better trading conditions (perhaps even a boom period) as life hopefully returns to normal again; furthermore, it is unlikely that goverments will not want to increase interest rates at a time when economies need to be restarted and encouraged; so perhaps the current turmoil in bond rates and share prices is a manufactured one rather than a fair one… time will tell, but one thing is for sure, if it is factored into prices in investment markets now, there should be much better times ahead!
I think that we are all feeling the weight of this latest lockdown in one way or another and I have certainly felt more isolated from you all as time has marched on; but as I have said previously, I am very much open for business and here for you if you need anything at all and I hope that we can soon meet up once again and maybe share some of our better stories of the past year!