Time For Your 10 Year Checkup
by Jim Mottram and David Ferguson
10 years have passed since the bankruptcy of Lehmans rocked the financial world. How has the world moved on and what does it mean for your Pension, ISA and other investments? Has your financial adviser or wealth manager discussed with you how they have prepared for any upcoming downturn?
Lehmans’ bankruptcy led directly to the strange financial world of the last decade with Quantitative Easing, extremely low interest rates, low inflation and the longest Bull market in history. However, repeated Eurozone crises, calls for Austerity, Bailouts and fears of a banking crisis have not entirely gone away even after 10 years.
Of course, the root cause of the 2008 crisis was debt, with global debt pre-crisis measured at 179% of global GDP. However, despite 10 years of so called austerity policies in many countries global debt now stands at an alarming 217% of GDP Even more concerning is the fact that the make-up of this debt has changed as it is more focussed on corporate and government borrowers while the quality of the debt as measured by credit ratings agencies is materially lower than in 2008.
In fact the widening wealth gap has led to the growth of populist politics in many democracies and this has defeated most attempts at austerity in developed markets, other than where it has been imposed by external authorities such as the EU. This has of course only added fuel to the flames of populist movements, and governments have generally failed (or in some cases failed even to try) to reduce their debt levels.
As QE ends and interest rates rise, the increased cost of servicing this debt plus the risk that maturing debt will be problematic to refinance represents a big danger to the world economy. There are only two practical ways for this level of debt to be dealt with and they are by way of defaults or increased inflation. Neither of these generate good results for the global financial system. In addition, the rise in anti-Free Trade rhetoric led by Trump has already led to some higher tariffs and runs the risk of igniting a full scale trade war. The effect of an overall downturn in the world economy caused by high tariffs combined with a global debt crisis could have disastrous consequences. While localised political issues such as Brexit, the anti-EU Government in Italy or the standoff between the Turkish leader and Trump may generate a lot of headlines, it is the underlying economic stresses which are likely to cause the initial catalyst, whatever it turns out to be, to develop into a full blown global meltdown.
Your Portfolio is Like Your Body: It Needs a Check-up
Is your portfolio set up to try to minimise the effect of a downward correction in market valuations or will it just follow the markets down in the same way that it has followed them up?
We at Activus cannot predict the future any more than anyone else …. We cannot tell you when the next financial crisis will occur or even what the catalyst will be which causes it will be.... We can predict two things with reasonable confidence however: i) there will be another financial crisis and ii) it will be different to the last one.
This is why we look at the past while analysing the present and attempt to use that analysis to construct a defensive portfolio that is prepared for whatever may happen in the future. Our process for identifying potential investments and in constructing well-rounded portfolios for our clients is explained here: Activus Wealth Investment Metrics. We would love to discuss these concepts and how they might be used to protect your pension, ISAs and other investments.
Our 10-Year-Check-Up gives you the chance to let our experts analyse your current portfolio and give you a frank, honest opinion as to whether it will stand the test of these uncertain times. Whether you have a current wealth manager or not this check-up is independent and discrete.
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Jim Mottram BA, DipPFS, CertPFS (DM)
Jim is a tax specialist with over 25 years of financial experience at prestigious institutions such as PwC, K & L Gates and Nabarro. He was an active member of the International Fiscal Association, and founded a group of independent tax advisors ensuring informed, practical and objective technical advice to clients. Jim holds a degree in history from the University of Leeds as well as a Certificate in Discretionary Investment Management and a Diploma in Regulated Financial Planning. |
David Ferguson BSc, DipPFS, CFA
With almost 30 years in finance, Dave has a broad knowledge and experience of global investments. He has worked in the UK, New York and Bermuda for investment companies including Citibank, Trinity Asset Management, Fortress and Apollo. Dave is a graduate of the University of London with a degree in Mathematics and holds the Diploma in Regulated Financial Planning and the Chartered Financial Analyst designation. |
Andrew Davisson BSc, CertPFS (DM)
During a career spanning 25 years in finance, Andy has worked at companies including Salomon Brothers and Trinity Asset Management. He has gained a wealth of knowledge and experience in the investment field and has managed investments both for clients and himself throughout his career both in the UK and Bermuda. He is also actively involved in two charitable trusts which he founded. Andy graduated with a degree in Statistics from University of Bath in 1986 and holds the Certificate in Discretionary Investment Management.