If you couldn’t get a ticket to MoneyWeek’s summit on 8 November, here’s an overview of what you missed. The theme was how to protect and grow your assets in a dangerous world. Andrew opened proceedings by noting that the outlook has rarely been so treacherous, yet rarely have markets seemed this buoyant. The S&P 500 has hit 50 record highs this year.
It may keep rising in the short term, juiced by the prospect of further tax cuts and deregulation under Trump 2.0. After that, the outlook becomes more complicated. If, as seems likely, he imposes tariffs, the likely subsequent fracturing of the global trading system implies higher inflation. Combined with lacklustre growth in the developed world, bar the US, that adds up to the stagflation MoneyWeek has been warning investors about for some time.
Alex Chartres, following last year's frightening overview of the geopolitical backdrop, delivered another, no less nerve-wracking masterclass.
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The key message is that all the assumptions investors made in the peaceful 1980s and 1990s, a time of quiescent inflation, are no longer valid. A more inflation-prone and volatile era lies ahead. The return of big government and geopolitical turmoil (the world’s ‘rogues’, China, North Korea, Russia and Iran, are acting increasingly in concert) are key features of the new environment. Ditto big government, the energy transition, climate change, the technology revolution and the population bust.
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Every day, China’s army practises a manoeuvre that would surround and overwhelm Taiwan (which would only have ten days’ natural gas to rely on if blockaded). Meanwhile, on the big-government front, the extent of public investment still required is illustrated by the fact that in much of Europe, it would still be faster to send 25 gigabytes of data by carrier pigeon than over the internet.
MoneyWeek Summit: will British stocks bounce?
The first panel of the day examined the state and prospects of the UK equity market, which, while extremely cheap, has been suffering from a listings drought and may be withering away. The UK market does appear to be dying, according to Bloomberg’s Merryn Somerset Webb, the former editor-in-chief of MoneyWeek. Our relatively high stamp duty has been left untouched, while the British ISA, which would have been an important signal that the UK cared about its own stock market, has been ditched by Labour.
Premier Miton’s Gervais Williams was a little more cheerful. A recovery has started, he thinks. The UK is already outperforming. In total-return terms, it has eclipsed the Nasdaq over three years. Rapid buybacks are compensating for an absence of local enthusiasm, and some overseas investors interested in income shares are drifting in. Britain is set to be the world’s best-performing market over the next 20 years.
Many talks about energy are sermons about economic and social governance (ESG), noted Barry Norris of Argonaut Capital at the start of his speech. His was different, characterising the energy transition as an apocalyptic religion imposed on citizens without due democratic process.
One of the big risks for markets at present is the impact of Donald Trump’s threat to impose tariffs. While this would certainly affect global trade, we mustn’t focus too much on the US and ignore the opportunities elsewhere as trade between emerging markets grows, agreed our emerging-markets panel. Consider Chinese electric vehicle manufacturer BYD, which just saw quarterly sales overtake Tesla for the first time. It is setting up in emerging markets from Brazil to Indonesia, as well as in the European Union, where it is building a factory in Hungary.
Then it was time for a keynote address from MoneyWeek’s columnist Max King, who gave an overview of the investment-trust sector. He reminded us why investment companies are MoneyWeek’s favourite form of fund. Two key reasons are that they tend to outperform open-ended funds with the same remit and the same manager, while they also have a better record of outrunning passive investments than unit trusts. Trusts’ structure also means they are suitable for holding promising but illiquid investments such as private equity or commercial property. Discounts to net asset value are high; global small caps appear especially undervalued.
A subsequent panel on structural-growth markets examined the state of play in technology, biotechnology, private markets and defence. Has the excitement over AI caused a bubble in technology? Paul Niven of Columbia Threadneedle Investments, who manages the F&C Investment Trust, noted that the big tech names are currently on roughly 25 times next year’s earnings, while in the late 1990s bubble, forward price/earnings ratios reached around 52. The net profit margin at the top seven tech firms then was about 16%, now it is 28%.
Gold, one of MoneyWeek’s favourite investments (we have been fans since the secular bull market began in 2001), has soared of late. It is virtually back to the inflation-adjusted record peak of 1980, noted Adrian Ash of BullionVault in the panel on gold and other precious metals. There is plenty of scope for further gains. Meanwhile, bitcoin, often deemed digital gold, deserves a place in your portfolio, says Dominic Frisby. The fact that you don’t understand it is no excuse not to hold it: people don’t understand the internal combustion engine either, but they still drive cars. The afternoon was rounded off by a presentation from Moncharm Wine Traders, which reminded the audience of the investment potential of fine wine.
MoneyWeek would like to thank the event’s sponsors: Sharps Pixley, OptionsDesk, QuotedData, Polar Capital and Moncharm Wine Traders
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