COVID-19 · 5/1/2020 · The Mystery of Edwin Drood and had it published (not the only person to...
Transcript of COVID-19 · 5/1/2020 · The Mystery of Edwin Drood and had it published (not the only person to...
COVID-19A weekly response: 1 May 2020
A look inside the Princely Collections For more than 400 years, the Princes of Liechtenstein have been passionate art collectors. The Princely Collections include key works of European art stretching over five centuries and are now among the world’s major private art collections. The notion of promoting fine arts for the general good enjoyed its greatest popularity during the Baroque period. The House of Liechtenstein has pursued this ideal consistently down the generations. We make deliberate use of the works of art in the Princely Collections to accompany what we do. For us, they embody those values that form the basis for a successful partnership with our clients: a long-term focus, skill and reliability.
www.liechtensteincollections.at
Cover image: Johann Jakob Schmidt, Detail from “View of Vaduz from the Swiss bank of the river Rhine”, 1833 © LIECHTENSTEIN. The Princely Collections, Vaduz–Vienna
Contents
4 Investment update
10 For each other
12 Literature: an escape from reality
14 Our commitment
A message of reassuranceWe would like to reassure you that, as part of the LGT Group, we are well protected in the event of negative economic developments. LGT Bank’s liquidity is well above the legally required minimum liquidity ratios, due to the bank’s solid refinancing and asset base. With a core capital ratio (Tier 1) of 19.9%, LGT is very well capitalised and has high liquidity. LGT Bank Ltd. is one of the few private banks that has had its creditworthiness checked regularly for many years by both Moody’s and Standard & Poor’s, consistently achieving very high ratings (Moody’s: Aa2 ; Standard & Poors: A+). The creditworthiness of LGT Bank’s parent company, LGT Group Foundation, is an important factor for the rating. The first-class credit ratings are attributable to LGT’s strong balance sheet, conservative lending strategy and earnings power, the latter based on over CHF 200bn of Assets under Management, as at March 2020.
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A weekly overview
The investment landscape
The tragic loss of life to the COVID-19 coronavirus continues,
with deaths in the US now exceeding those caused during
the Vietnam War. In the UK, the number jumped with the
inclusion of deaths in care homes rather than just hospitals.
However, the lockdown appears to be working as we see a
falling infection rate.
They have taken heart from reports of progress on
treatment and a possible vaccine, resulting in the S&P 500
having its best month in over thirty years, despite falling on
the last day of the month.
Medical update
Last week, there were reports that an incomplete trial of
a new drug, Remdesivir, in China had shown little benefit.
This week, however, Gilead released the results of a much
bigger trial which appeared to show that Remdesivir could
speed recovery in severely ill COVID-19 patients. US Food
and Drug commissioner, Steven Hahn, said they would move
at “lightning speed” to review the data for possible approval
of its use on a wider scale.
“Financial markets continue to balance poor
results and dire economic numbers with
the extraordinary level of support from
central banks and governments around
the world.”
Jonathan Marriott, LGT Vestra Chief Investment Officer
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President Trump announced “Operation Warp Speed”
to combine resources to develop a vaccine with the
government accepting the cost of any failures. There are
signs of progress, but Remdesivir is a treatment that eases
symptoms and is not a cure.
In the UK, there were reports that a lab in Oxford is ready
to test a vaccine. A vaccine will take many months to trial
and get into production, suggesting that lockdown, in some
form, will have to remain in place for many months to come.
Tracking people and extensive testing may enable some
restrictions to ease, but working practices will have to adapt
to social distancing until a vaccine is available.
Economic action
The economic numbers continue to be gloomy. In the US,
the weekly Initial Jobless Claims indicate that over 30 million
people have lost their jobs in the last six weeks. This is close
to 20% of the US workforce.
Most economic data reported so far does not reflect the
full shutdown and the flow of extremely weak data will
continue for some time. Clearly, this is to be expected, and
markets will be looking at the path out of lockdown for
direction rather than reports of how deep the recession is.
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Monetary and fiscal response
This week we have seen regular meetings from the Federal
Reserve (Fed) and the European Central Bank (ECB). With so
many measures already in place, these meetings made small
changes compared with the drastic announcements we have
seen in previous weeks. Unsurprisingly, the Fed announced
that rates would remain low until they were confident
that the US employment numbers are closer to pre-crisis
levels. The ECB has reduced the rate on one of its support
programmes to encourage more bank lending. Markets
were slightly disappointed that the ECB did not expand its
bond purchase programme further.
Market update
It has been results season for the first quarter. The Q1
results only see part of the impact of coronavirus, hence it
is trading statements and expectations that have been of
more interest.
Overall, many companies are abandoning predictions about
future results, saying the impact is just too unpredictable.
Companies that sell items that people need or have to
spend money on have done well so far. Whereas those
dependent on discretionary spending or capital investment
are suffering. The trend to online shopping accelerated
resulting in non-food high street retailers being hit hard.
While some turnover may go back to the high street, it
is a long-term trend and is unlikely to be fully reversed.
Dividends continue to be cut to preserve balance sheets,
with Shell, following the decline in the oil price, cutting its
dividend for the first time since the Second World War.
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“Shell was a major contributor to the
dividend payments for the FTSE 100
index and we expect dividends to
be less than 50% of what they were
pre-coronavirus for the index as a
whole.”
Jonathan Marriott, LGT Vestra Chief Investment Officer
This will still leave the yield higher than many other
developed markets and attractive relative to Gilt yields,
which are just 0.23% for ten years.
Dispersion within equity markets remains high in the sell-off,
growth style outperformed value and this continues to be
the case. In the US, the Russell 1000 Value Index is down
18% whereas the growth equivalent is down just 1%. We
expect this trend to continue.
With government bond yields low and support from central
banks buying, corporate bonds have been well supported
and we continue to favour this area for those looking to add
risk in portfolios.
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Conclusion
Equity markets continue to balance the impact of declining
economic activity and actions taken to support markets and
the wider economy. Equity markets, having risen sharply
during April, have seen some weakness towards the end of
the week.
We expect markets to remain volatile in the weeks to come
with a very wide dispersion of returns both on a sector basis
and at individual company level. Quality growth equities
have outperformed and we believe that strong companies
will continue to outperform. Thus a selective approach to
both equity and credit markets is appropriate.
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“ Many companies are abandoning predictions about future results, saying the impact is just too unpredictable.”
Jonathan Marriott, LGT Vestra Chief Investment Officer
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Showing our resilience, our kindness and
our strength for each other
For each other
We are all adapting to a major change in our daily life. With
many now in isolation, it can be challenging to support
friends, family members and colleagues, amongst others.
Over the past few weeks, we have found ourselves thankful
for many things. For the NHS, for the community spirit we’re
seeing in towns up and down the country, thankful for our
family and friends, thankful to our colleagues on daily calls
and video chats to keep the camaraderie alive.
We are also thankful for this time to take stock and
appreciate the little things, as it is these that will get us
through these troubled times together. Thankful for a daily
dose of sunshine. More time for home-cooking. More time
with our families. We are thankful to you, our client, for
placing your trust in us. We are thankful for all of these
things and more. What are you thankful for?
We have launched ‘For each other’ where we share
each other’s stories of thankfulness as we aim to
foster a virtual community and reinforce the message
that we are here for each other. We’re asking you
to share with us moments that you are thankful
for. Please send these through to your
LGT Vestra contact or [email protected].
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An insight into what you, our clients, are thankful for this week
I am delighted I havetime to read some
of the innumerable bookssitting on my shelves.
Four sitting on my deskpresently include:
The Fellowship insteadasked for my piece to
be put on their website.I now send it to you toshare with your clients:
www.dickensfellowship.org/content/unriddling-edwin-
drood-writing-second-part-%E2%80%93-
sir-david-madden-kcmg
In 2011, I wrote the secondhalf of Charles Dickens'
unfinished novelThe Mystery of Edwin Drood
and had it published(not the only person to
attempt this by any means).The Dickens Fellowship
asked me to speak aboutDrood at a conference on
17 July, now cancelledbecause of the pandemic.
The Dawn of Eurasiaby Bruno Macaes
The Language of Citiesby Deyan Sudjic
Utopia for Realistsby Rutger Bregman
Mr Five Per Cent:The Many Lives of
Calouste Gulbenkianby Jonathan Conlin
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Literature: an escape from reality
“To read more” is frequently at the top of New Year’s
resolution lists, something we scold ourselves for not doing
more of when we are commuting or before we go to bed.
Too often, it is a resolution that mainly experiences success on
holiday, by the beach or on the plane.
All that, however, seems to have changed. Since the
beginning of lockdown, one in three are now reportedly
seeking comfort from the pages of a book.1 Not just any
books: fiction – classics and crime novels specifically. So it is
escapism that we crave.
There are other reasons too. Screen-time is higher than
ever. Many of us are working from home; we are socialising
virtually; we are consuming newsfeeds on phones and
tablets; we are even exercising via online platforms. Reading
is a break from all of that. And with more time on our hands,
whether it is due to working more flexibly or weekends with
less social commitments, reading is a welcome distraction.
So whether it’s a break from your screen or a break from
reality that you seek, our investment managers have shared
some books they have read during lockdown to help inspire
you.
1 The Reading Agency
Being thankful for the written word
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Mythos: The Greek Myths Retold by Stephen Fry - Paul Nixon, CEO LGT Vestra US Having always enjoyed ancient history, it is a guilty pleasure to have these classic (and sometimes very dry) stories brought to life again through Stephen Fry’s down to earth humour and modern story-telling.
Win Bigly by Scott Adams - Charles Sanford, Partner and Wealth MangerA fascinating journey into the mind and method of President Trump. Like him or loathe him, in being elected President, Trump achieved what many predicted he wouldn’t. The book explains his ascent to power, at least as much down to judgement as luck, at the same time giving a great insight into the psychology of persuasion.
The Hunger Games by Suzanne Collins - Lydia Brook, Assistant Wealth Manager I loved the trilogy when I first read them, and have been meaning to re-read them for a while. Lockdown has freed up time for me to dip back into them. Great story and great characters.
84 Charing Cross Road by Helene Hanff - David Lane, Partner and Technical Director This book demonstrates how books can bring people together even when they live thousands of miles apart.
Shantaram by Gregory David Roberts - Natasa Williams, Partner and Head of Private OfficeA story of human resilience, love and wisdom depicting extraordinary acts of kindness set in the midst of extreme poverty in India. Reading Shantaram took me to another world,a book to be read slowly, as many pages are so wonderful they need an immediate re-read.
The Ginger Tree by Oswald Wynd - Jenny Tozer, Partner and Investment ManagerIt is the true story of a Scottish lady who left the UK in 1903 to marry a British Military attaché based in Peking. The narrative reveals the enormous changes in both China and Japan over the ensuing 60 years. It tells the story of gradual cultural assimilation over a lifetime of learning.
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Our commitment
In order to tackle the negative effects of the coronavirus
pandemic, we have committed to supporting The Rapid Action
by The Fore and Trust (RAFT) emergency fund.
RAFT’s purpose is to enable organisations, working with
pressing social issues, to remain operational and continue
their vital work reaching people who need help the most.
We hope to raise £100 000 to support their efforts,
kick-starting this with a £25 000 donation. Having reached
an initial £1 million, RAFT temporarily opened up funding
applications to new charities. Within 48 hours, they received
500 applications, demonstrating the crucial need for
funding now.
Thank you to each of you who have already joined us in our
efforts to support RAFT’s work.
For more information, please visit:
www.thefore.org/covid-19-response-raft/.
Charity in focus - The African Gifted Foundation ■ A science and mathematics academy for exceptionally gifted
disadvantaged girls from across Africa. When the crisis began, all of the students were sent home - into households where they often have no internet connection and additional caring duties.
■ The organisation is seeking funding to provide tuition to these students using new methods, so they can earn much-needed qualifications to help them find a way out of poverty.
■ With RAFT’s support, The African Gifted Foundation is able to keep on the necessary teaching staff and purchase equipment to keep on teaching.
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Donate via The Fore website: ■ www.thefore.org/raft-donation-form/
How the RAFT fund works
Financialdonation
Pro bonodonation
TheRapid Actionby The Foreand Trusts
(RAFT)
Providing support to hundreds of small charitiesand social enterprises
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www.lgtvestra.com
VALUES WORTH SHARING
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