I won’t even mention the dreaded ‘B’ word.
But one thing I can guarantee is that you and I have no control over whether there’s no deal, a bad deal or a second referendum. Our fine, upstanding body of elected representatives will decide that in the coming weeks. Even if they conclude that a second people’s vote is the best way to resolve the conundrum, can you imagine how long they’ll want to debate the exact wording of the question?
The bottom line is, you and your financial future cannot wait for that process to drag to its weary conclusion. Nor can your family’s long-term wealth be allowed to depend on whatever state the UK may find itself in when the cabbage has boiled to green mush. If ever there was a time to take control and insulate yourself from politics, 2019 is that time.
My main theme this year is Wealth 2020, using the current year to put in place the critical strategies that will allow you to enter the next decade with peace of mind and certainty that, no matter what happens in the wider world, you and yours are financially sorted.
So What Happened in 2018? Wealth managers used to talk in a fancy-pants way about ‘un-correlated assets’, in other words when one thing went down in price, the other might go up or at least stay the same. That theory took a big hit in 2018 when pretty much everything headed south at the same time.
Many people saw years of steady gains wiped out in a few short weeks towards the end of last year. After one of the longest bull markets on record, it brought a harsh reminder of the words in every fund manager’s small print – ‘share prices can go down as well as up’.
European stock markets fell by a similar amount and, while America’s S&P500 was ‘only’ down 7.5%, four out of every ten companies in the index saw their share price decline by 20% or more during 2018. That caused Morgan Stanley equity analyst Michael Wilson to announce that ‘we are now in a bear market’, even though the official definition is when the whole index falls 20% from its high.
Even the mighty FAANGS, the tech stocks that have driven much of the growth in America’s economy over the decade since the financial crisis, finally fell off their perch. All looked rosy in the late summer when first Apple and then Amazon reached valuations of $1 trillion, only to lose 20% of their value as earnings growth failed to meet sky-high expectations and uncertainty around Trump’s trade war with China came into play.
So what will the smart money be doing in 2019? Well, a recent survey by BlackRock of 250 institutional investors with $7 trillion under management revealed the following decisions:
- 50% plan to reduce their exposure to equities in 2019
- They will increase their exposure to ‘alternative real assets’
- These include infrastructure, commercial property, art and private equity
This is a ringing endorsement of our own Wealth Pyramid approach, combining commercial property such as care homes and hotels with the Essington cemetery project that is our equivalent of a private equity opportunity. Similarly, the bonds and loan notes where we share in the profits of a property development closely mimic the activities of private equity houses.
What I do find interesting is the big institutions’ tilt towards hard assets like fine art. Something we’ve been banging the drum about for the last 12 months. In fact, we’re also launching a further asset class driven by the same global trend – investment grade wine. To reinforce our own commitment to alternative assets, albeit slightly short of the $7 trillion investment level, we’ve organised an evening event next month dedicated to fine art and fine wine.
We’ll have Aidan Meller from Meller Art Club explain why this is the perfect time to add the odd Picasso or Pre-Raphaelite to your portfolio, even if you currently have difficulty discerning the difference between the two. And we’ll have Marcus Allen from Cult Wines explaining how they are consistently achieving double digit returns for their investors from some of the most sought after vintages on the planet.
It would be rude to discuss wine without glugging some, so we will be sampling some of Marcus’ wares while Aidan explains the story behind some amazing works of art that will be on display. Click here for details and to grab one of the 20 tickets available to this unique and exclusive evening.
Just watch out for spies from BlackRock trying to see what we are up to next…
Until next time.