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Client Update - 6th January 2021

It is indeed a new year, but perhaps today it does not feel quite like it yet. In the UK we have moved into lockdown 3, although we have the light at the end of the tunnel that should the spring vaccine programme be successful, we should be able to move forwards with more confidence through 2021.

It feels slightly surreal to be writing to you with a Brexit deal behind us. The outcome was admirable under the circumstances, as negotiations were conducted during a pandemic, to a tight timetable and with, at times, what seemed to be irreconcilable differences. The deal is broadly in line with precedent but, crucially, by providing for zero tariffs and zero quotas, goes further than other free trade agreements. The fact that the two sides reached an agreement provides a basis for more positive future cooperation than a possibly acrimonious no-deal outcome.

There is little doubt that the deal should be good news for the UK economy, and this has been borne out with market performance so far this week. The deal brings long-awaited clarity for business and is a better outcome for the economy than the alternative of operating under the rules of the World Trade Organisation. Trade tariffs and quotas would have added immediate and unanticipated additional costs to trade. With another lockdown it is sensible to assume we will see another recession in the UK with negative growth in the fourth quarter 2020 and first quarter 2021, however this feels different with the vast vaccine roll out already under way.

Further afield, we are closely watching the Georgia run offs for two Republican seats in the US Senate and it looks, as I write, that the Democrats may secure both seats to tie the overall Senate with the Republicans. With the tie-breaking vote of Vice President elect Kamala D Harris on the side of the Democrats, they may yet be able to bring in many of their election promises over the next two years. These include tax increases on corporations and high earners, an expansion of federal healthcare subsidies and a review of some of the tech giants’ monopolies. The tight race in Georgia has led to a sell off in last year’s tech market leaders, and with Biden’s big idea of significant investment in green infrastructure to follow, there is a chance that last years US market front runners may be usurped by other areas of the market in 2021, such as small cap companies and green infrastructure. We have already started to focus some of our UK equity holdings towards more value orientated mid cap names post a successful Brexit outcome, and it may be that in 2021 this is also a sensible trade in the US.

As a firm we still have the majority of our administration team based in the offices, with strict social distancing guidelines in place. This ensures that we can continue to provide a first-rate service to our clients, whilst also allowing our advisers and support staff to work sensibly from home. I am afraid as we are once again in lockdown, we are not able to provide face to face reviews for our clients. We do have a wealth of other online meeting options available at our disposal, so we look forward to seeing you all through an interesting first quarter of 2021 – we even have the good old-fashioned telephone if we need it!

Should you have any feedback for us on the service that we are providing, please do let us know. We are about to roll out our usual client quarterly reporting and we hope that you find it interesting and pleasing in that the investments that we recommend to our clients recovered incredibly well through 2020 and have set us up well for a promising 2021. Whilst the next six months seem inextricably linked to the successful vaccine distribution and no unforeseen issues developing with variant strains of COVID-19, as with 2020, should the news change, we will change with it. Ultimately, we are comfortable there will be good news to focus on, eventually, in 2021. May I wish you a Happy New Year and we all look forward to catching up with our clients soon.

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