This week’s update comes from Ollie Parsons, trainee investment manager in our Bishop’s Stortford office.
With the first step of the Prime Minister’s roadmap out of lockdown achieved without cause for national concern, step two began on 12th April. This saw the opening of non-essential retail businesses, including the much needed (for some!) hair salons and barbers, as well as the highly anticipated, and in some cases much required, opening of beer gardens in England. Despite less than ideal conditions in certain parts of the country, showers and snowfall did little to hinder people in their thousands having their first social pint of beer or glass of wine since December.
The English have emerged from their winter hibernation with a sense of optimism, so the looming question we have to ask ourselves on the mainland is ‘Is this really the beginning of the end for the restrictions?’ The continued rollout of the vaccine, in particular the vulnerable and elderly having either had, or booked, their second dose, further reduces risk and transmission as well as protects those most susceptible to the coronavirus. The NHS have been focused and purposeful in their goal, and have outperformed far beyond the country’s expectation for the vaccine distribution - few would have wagered that 45-49 year olds would be called upon for their first dose by mid-April.
This optimism has also seemingly spread to the UK market, with the FTSE 100 up over 200 points  since the start of April (at the time of writing). According to a number of analysts , investors may currently be in the midst of repositioning portfolios with a tilt towards ‘value stocks’, identifying companies whom they view as ‘undervalued’ or have scope for improvement and can therefore offer more upside potential, particularly as the economy recovers from the pandemic. Concurrently, with some declaring the economic rotation to be real , the age-old question of growth vs value stocks has come to the forefront once again. Historically, value stocks tend to perform better at the start of the economic cycle, and with businesses due to reopen full time in the coming months, value is making its greatest case for years in comparison to its growth counterpart.
This should come as no surprise to market analysts, as the UK market has higher exposure to, and is often seen as, a value driven market, which corresponds to the poor performance when comparing to the growth-orientated US and China . However, with the restrictions beginning to ease, the topic of value stocks was discussed in Ravenscroft’s UK Investment Committee meeting last month, with a consensus view towards re-evaluating our strategy weighting and in particular, if there were any holdings of interest we should add to increase our UK value exposure.
After much debate, our decision was to invest a proportion of our cash weighting into the Premier Miton UK Multi Cap Income fund, which provides us with increased levels of exposure to the UK value sector. The fund itself is already held within the Peterborough branch portfolios, returning an excellent performance alongside strong quarterly income levels throughout 2020, despite some volatile market conditions in the year.
Only time will tell where we are in this economic cycle and indeed, if we have reason to have the most optimism the country has had for over a year. If we do make it to 21st June without a setback, and vaccine rollout continuing to reduce cases and deaths, perhaps there is cause to be cautiously excited for the summer, with holidays, reunions, and even a simple meal out helping to return the country, and the world, back to normality.
As the late, great Robin Williams said....