Investment News & Views

Weekly Portfolio Overview
April 2020

With some places around the world easing restrictions, we seem to be approaching the end of the beginning of the corona virus. The UK is not yet in a place where a timeline can be established for our next steps. But in some parts of Europe, shops and schools are reopening. In China, tourist sites, including the Great Wall of China, are open for business again. In many countries, as the numbers of both cases and deaths appear to be reaching their peak, the discussion has now moved to the exit strategy.

The world will be watching to see how the virus can be contained in countries which are cautiously reopening. Germany, Denmark, and the Czech Republic are reopening shops. Nursery children are returning to school in Norway and both nursery and primary school children are returning to schools in Denmark. Some businesses are reopening in parts of India which are not virus hot spots. In many countries, the reopening will be balancing act between the numbers of cases and the ability of the country to care for its poorest citizens – the ones who already struggle and go pay check to pay check.

In more developed economies, low numbers of cases, the ability to test and contract trace will be the requirements for a cautious reopening. The real end game will be a vaccine or a significant scientific advancement in the treatment of the Covid-19. With all the world’s scientists working on a number of different vaccines and treatments, advances could be made at record speed. The move to trials for many pharmaceuticals has already been approved at speeds faster than would typically have been seen in the past.

There have been some promising developments. Last week some early results were released from a trial of patients at the Hospital of the University of Chicago using an antiviral drug called Remdesivir. It was originally developed in response to Ebola by Gilead Sciences, an American biopharmaceutical company. Over 100 patients were treated with Remdesivir on a compassionate use basis. Most of these patients recovered, and many were discharged from hospital 6 days after receiving their initial dose. Gilead has since announced that they would be increasing the enrolment of their initial trial from 2,400 to 6,000 patients around the world. The data from their original trial will be released by the end of April with further trial data to be released in May. The company itself has advised caution until full results are available and further trials completed.

There are several other antiviral drugs which are being tested and there are also trials for medications to treat severe complications from Covid-19 such as for the prevention of cytokline storms, or the overaction of the immune system. Many vaccines are also in the pipeline, though the wait for a vaccine to be commercially available could be up to 18 – 24 months.

Although we are starting to see how we will get through this, it has also become clear that a return to normal life will take some time. Some countries are now experiencing a second wave of infections. Japan has declared a national state of emergency and the number of cases in Singapore has also been rising. The UK government does not yet feel that it is prudent to estimate the time scale of our own exit strategy. They are planning on reopening cautiously in an attempt to avoid a second wave.

Along with this continuing social and public health crisis, there has also been an economic one. Around the world, unemployment is reaching record levels. Another 5.2 million people filed for unemployment in the US last week. That brings the total to nearly 22 million people who have lost their jobs just in the US in the past month. The IMF has warned that Asian economies will see zero growth this year after warning that the world economy is shrinking at record pace and will face the “worst recession since the Great Depression”.

Although President Trump would like to re-open the economy by May 1st, he does not have the authority to make that decision. Ultimately, it is decided on a state-by-state basis with many governors, scientists and medical professionals, including Dr. Anthony Fauci, the White House infectious disease expert, believing that doing so too early would endanger the lives of their citizens. Last week US retail sales dropped by 8.7% in March, the biggest decline ever recorded. This week oil futures have fallen to negative levels for the first time ever. We therefore remain cautious but can also see a glimmer of hope for the future.
Portfolio Weekly Updates

Guardian Portfolios

There is still a large amount of volatility in the market triggered by the daily uncertainly, lack of consumer demand, and varied political, health and economic news. We do feel that we may have reached a new range in the market. After reviewing both moving averages and crossovers from data as of close of business on Friday, we could at this time see a clearer upward trend. We continue to review this daily, but do not want to be driven by daily price changes. Although these are unprecedented times, we are continuing to base our decisions on technical indicators in our frequent investment committee meeting calls.

Having saved our investments from much of the fall in prices in Feb and March, we have been cautiously re-entering the markets this month. We have now decided to completely re-enter the US and international markets. We are also moving further into all other markets, except property, and have decided to redeploy our basket of bonds for the uninvested equity allocation. This keeps us on cautious footing but allows us to have more exposure to both equity and bond markets.

Green Path and Heritage Portfolios

As the markets have been rising, these portfolios have also been rising. Both invest in funds which are different from the average passive investment with Green Path investing in ESG funds, and Heritage investing in investment trusts. We expect these portfolios to continue to recover as the markets do.

**NEW Foundation Portfolios – Now Available **

We are ready to launch our Foundation portfolios. They are available on all the platforms on which we are currently trading. These portfolios are passive unit trust investments and are not traded tactically using trend-following. They are always 100% invested in the asset allocation. Foundation portfolios can be blended with Guardian portfolios to provide a mixed-strategy of a passive asset allocation combined with a trend-following strategy. When used independently, they have also been competitive compared to their benchmarks. Foundation fact sheets can be found on our website: Crossing Point – Foundation Portfolio

**New Heritage Dividend Portfolios – Work in Progress **

We are working on creating new portfolios of equity investment trusts and bond funds for long term investors seeking natural dividend income from a balanced or cautious portfolio. Unlike shareholders or open-ended investment companies, investment trusts do not have to pay out all of their income and can instead reserve surplus income for future dividend payments. Investment trusts have the advantage of being able to smooth their dividend payments and can be a more reliable source of income for investors. We are in the process of completing these portfolios and hope to have them ready for investment within the next week.

We wish you all well. Thank you for everything that you are all doing in this fight. If you are out on the front line, an essential worker, or staying at home and protecting the NHS and the rest of society, thank you. This is a hard time in many ways for many of us. We are grateful for you all.

  • Wednesday, April 22, 2020

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Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.