This week’s update comes from our advisory investment team in Guernsey.

Welcome to 2020, we wish you good health and contentment for the year ahead.

Markets-wise, the new decade will continue very much as the last one ended, investors being well aware that Central Banks are powerless to halt the regime of quantitative easing. Any sign of financial difficulties and the tap is turned on, thereby preventing the more natural outcome of the 2008 crisis. Developed markets feed off unprecedented low or negative interest rates and investors scurry from one overbought position to the next. Inflation looks buried and political leaders/bankers are reluctant to normalise interest rates for fear of economic instability and, more importantly, public disapproval.

Since I’ve worked in stock markets (far too long but the fascination is as strong as ever) the impact of outside influences have governed sentiment and thereby asset valuations.

These may be political, geopolitical, financial or indeed, anything else. The first Gulf War, the not really the Labour Party in the 90s, September 11th, the EU, the digital revolution etc etc.

There’s always something happening and markets reflect this by reacting positively or otherwise, which makes the legacy of the 2008 financial crisis more and more exacting. The crunch of reality consumed everybody but the Central Banks and governments devised a solution to stabilise.... and we were saved.

However, it worries me that 10 years later these counter measures are pretty much still in place. Effective crisis management has become the norm and markets nourish themselves on synthetic manipulation rather than authentic valuation events. This has created a vacuum of unrealistic asset prices and a good dash of smugness that difficulties will be eliminated. This may well be the case for the foreseeable future and offers good reason to stay invested, but it’s never wrong to prepare for the unexpected.

Only this week we've seen Donald flexing his military muscle and taking out Soleimani. Whilst the Daily Mail prophesises this is the beginning of World War 3, the reality (one hopes) is that an opportunity was exploited for entirely legitimate reasons. The point though is that one day something will happen which will disturb the markets to such an extent that intervention is necessary and that, in a nutshell, is the problem. Firepower is limited.

We remain committed to the themes that will drive global growth in the decades ahead. Technology, healthcare and energy are examples of our focus, but as always we also see the potential in addressing current opportunities.

The UK election has unleashed positivity not seen for several years and this should reflect in the rebalancing of equity valuations in this country. Not without risk of course but the election outcome has harnessed genuine relief as well as the realisation that parts of our market have some catching up to do.

So whilst this brief missive expresses concern over irrational positivity, opportunities still remain. Current exploitable events combined with central themes and alternative assets give investors every reason to be enthusiastic about the prospects for the year and years ahead.

FINANCIAL PROMOTION: The value of investments and the income derived from them may go down as well as up and you may not receive back all the money which you invested. Any information relating to past performance of an investment service is not a guide to future performance.