Jonathan Punter's blog

Previous Article Next Article


Optimism for the “you-ain’t-seen-nothing-yet decade”

What difference, I asked myself, would it make if I were to add my two penn’orth on the continuing impact of the biggest global pandemic of the 21st century?

Precious little, some of you would no doubt observe.

But while I certainly don’t want to add to the unnecessary noise made by a multitude of commentators, I can offer something which might help investors make sense of it.

In one of my previous posts, I summarised the main points from an interview with the chief investment officer of Punter Southall Wealth, Tom Becket.

In front of colleagues, I channelled Michael Parkinson (younger readers, see link) while Tom did what he does best: explained directly and persuasively how he views the world in the context of advising his clients, something he’s been doing for us for 16 years.

One of his forcefully made points which resonates now was the incredulity of his contacts in China at what they viewed as Western complacency to the economic threat posed by coronavirus.

The format was so well received that we thought we’d stage a repeat performance for public consumption.

Our conversation is currently in the edit suite and will be made available shortly but I just wanted to pull out some of the more salient exchanges for this latest blog by way of preview.

A heart attack for the global economy

Tom likened worldwide market convulsion to “a heart attack for the global economy” but one built not solely on the shock of the new virus but the underlying lack of trust between institutions like banks and the growing reality of companies and customers being forced to consider whether or not they can afford to pay each other, as cashflows are wiped out and default risk rises.

Fear now loomed over greed in a way unthinkable even six weeks ago. That said, investors would be presented with opportunities to make money from the ultimate recovery, affording investors far greater chance of making “real money” than was feasible at the start of the year.

You-ain't-seen-nothing-yet decade

The strangely low volatile environment of the last ten years will seem calm by comparison to the next decade, which Tom termed the “you-ain’t-seen-nothing-yet decade”. Interest rates are one of my key preoccupations and in our last conversation, Tom said they may never go up again. Indeed, down they went and we are back to the zero interest rate world we thought had been consigned to the history books in the Great Financial Crash of 2008.

A key reason was that government debt had now ballooned to the point that interest rates had to be kept low to afford it. If government bond yields start to rise, as we have seen in recent days, this could be the “Black Swan” that nobody expects and one we have deliberately positioned our portfolios to protect against.

Imprisoned by passive

Having heeded the initial warnings from Wuhan in our last conversation in early February, Tom had been able to protect client capital but for those invested in gigantic, open-ended passive mutual funds, he was fearful. 

“I would be terrified if I were in a big fund of that type, trying to get out. It brings to mind the Warren Buffett quote: “when the tide goes out, you can see who’s not wearing a swimming costume”; my guess is that there are a lot of naked swimmers out there, who haven’t even realised it yet”.

Indeed, he had acted before this crisis to mitigate the looming impact of what he saw as the growing risk of equity markets at an all-time, unsustainable high.

Battered markets to bloom again

That said, Tom now expected markets to be higher over the next five years and while there were passive elements in his client portfolios, what was called for now was a nimble, questioning approach.

Over the last 20 years, returns largely justified fees. Now, a new era was opening up in which advisers would have to work harder - and more intelligently - to discover value in a transformed investment landscape

As ever, Tom puts it better than me. We’ll let you know when our interview is live so you can judge for yourself.

Stay safe, everyone.

Don't forget to share this post!

LinkedIn Twitter

The strangely low volatile environment of the last ten years will seem calm by comparison to the next decade

Punter Southall ranked in FTAdviser's Top 25 Financial Advisers


The Top 100 ranks companies by looking at factors important to clients seeking the best person to assist them with their finances.


Sign up here for Jonathan Punter's blog

After 40 years of experience in the pensions world, I'm sharing my insights.