Partial Recovery

Positive developments in the creation of a vaccine for Covid-19 by several companies have resulted in markets jumping very favourably indeed. We are pleased to share we have benefited handsomely from that renewed optimism in the future! Whilst several investor platforms apparently collapsed temporarily through the volume of buying interest (the time to buy is before such announcement, not after…) there is still plenty of value out there if you are concerned you may have missed the boat. We are happy to receive any new funds to invest for you and shall still spread your funds very carefully and diligently!

Well, what difference just a few days can make. Pfizer’s announcement saw one of the biggest one-day gains for a very long while and improvements in some of the most bombed-out value stocks of up to almost a half – not really what should be the case for multi-billion pound entities but showing how overdone the descent had been and continues to be when considered against ‘normal’. I can’t remember the last time I saw so many significant gains on the ‘leader board’ as that (an old stalwart in the industry suggested last experienced in 1975), with the ‘inevitable’ bounces in holiday companies and so many others which will benefit from optimism which killing the Pandemic will bring. Yes, it is early days in any recovery too and there could be some slippage but two other interesting things happened too – those who had done nicely by short-selling shares in these companies beforehand were scrambling to buy-in stock to cover themselves, thus accelerating the gains and secondly, tech beneficiaries from lockdown were rather more unloved.

Interestingly, whilst I am not a superstitious ‘chartist’ per se (we look at all sorts of indicators to consider an investment, or not) but lots of the previous big gaining stocks and funds appear to be ‘rolling over’ on an unsustainable series of peaks on their charts. When considering equilibrium lines, numbers of days above the moving averages, etc and the appearance of drifting enthusiasm to boot, companies like Amazon could easily drop by a third (and would still be expensive). Over here, the funds which have done so well from this frenzy for tech like Scottish Mortgage are just as over-extended and indeed, are geared (they borrow to invest) which accelerates the decline when things go against them, just as much as it boosts performance when things go in their favour. The problem with ‘momentum’ investing is that if most of your co-investors participate on the same premise, so then the trend to exit is likewise as rapid. Check-out the graphs of some of the stocks which have propelled things so high yourself and see what you think – and also look at the main US indices and the NASDAQ.