Advisory Investment Service | Precious Metals | Ravenscroft Group | Robin Newbould
06 Sep 21

Diversification 101, revisited, eventually

This week’s update is from Robin Newbould who, regrettably (for him at least!), we may hear from less often in his role as Chief Operating Officer but who wanted, with his Ravenscroft Precious Metals and Ravenscroft Advisory hats on, at least one last hurrah.

I very much enjoyed sitting in on a Ravenscroft client meeting at the end of last week, making notes and ‘assessing’ the advice given by one of our amazing investment-qualified client services team to a really lovely Guernsey-based couple. Aside from the fact that I felt like a driving test examiner, it was a real treat to see clients comment on the fact that they were delighted with the service they were receiving, the performance of their investments and to hear that they had arranged to come in to transfer further funds to their portfolios.

What also struck me in the meeting (and also from being tasked with ‘looking at’ our group terms of business and account opening forms and such) was just how much information, sometimes quite personal, we need to gather in order to a) cover off our regulatory obligations but, more importantly for you, b) provide the best investment advice we can. There is no easy way to ask, but I have to say I was more than a little impressed with the use of diagrams, stats, scenarios and slides all designed to make clients think about what they are really after from their Ravenscroft accounts.

When we ask what other assets you have, what your attitude to risk is, what your objectives are, how many children you have, what your mortgage is, how much you spend each month, whether you understand what (in basic terms!) market volatility is, or has previously looked like, or might look like in the future, we are really trying to ascertain that you have considered what your investments should behave like (noting that past performance is no guide to the future) and that you have diversified your overall wealth. I wrote something last year on this very topic, which you can read here 

I mentioned back then that “2020, by most metrics, [was] an extraordinary time” but you would be forgiven for thinking that the period between then and now, in relation to financial markets, was like night and day. As the below table from Bloomberg confirms, for example, the UK FTSE100 has risen by nearly 24% in the last 12 months.

The US S&P500 has bettered this with a 32% rise in GBP terms … so was the sell-off in 2020 too great, or has the 2021 recovery run too far? As usual, we don’t really know. Nor are we any more expert in the economic effects of global pandemics now than we were then, but what did hit the news last week was the markets’ focus on the potential handling of the Delta variant of coronavirus. A key economic statistic, in the form of US nonfarm payrolls [1] for the month of August, was reported at 235,000 last Friday, this number being the lowest in seven months and well below forecasts of 750,000, as a surge in Covid-19 infections may have discouraged companies from hiring, and workers from actively looking for a job. With a continued sense of morbid irony, this was considered good news for equity investors and indices rose, as the threat of central bank interest rate rises or quantitative easing tapering was put aside for another day, again.

It was also considered good news for gold, which has been back on some investors’ minds (and in their portfolios, especially in Europe, where gold ETFs added nearly $1billion in July [2]) as, amongst other effects, the US dollar weakened on the ‘new’ economic outlook. The gold price, in US dollars, cleared a technical level on Friday, as shown below:

From https://www.kitco.com/

That said, the price is still some 16% off its all-time highs in GBP sterling terms [3] … proving its non-correlated status, which might be considered part of its allure on another day!

Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else’s religion, but he’ll accept his gold.
Robert Kiyosaki 

Sources

1 https://tradingeconomics.com/united-states/non-farm-payrolls#:~:text=Non%20Farm%20Payrolls%20in%20the,Thousand%20in%20April%20of%202020

2 https://www.fxstreet.com/news/european-investors-pour-nearly-10-billion-into-gold-etfs-in-july-ft-202108110555

3 https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/

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