Stock Take

US stocks reached new highs at the end of the four-day trading week, with technology stocks enjoying a resurgence.

They were also supported by an announcement from President Joe Biden, who unveiled a $2 trillion infrastructure plan last week. Although broad-ranging in its scope, the plan focuses on things such as broadband, scientific research, and electric vehicles, which are expected to be a boost for the technology sector.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell towards the end of the week. This number, which has been rising steadily so far this year, has a knock-on effect on the prices of lots of financial assets. Its increase so far in 2021 appears to have been weighing on the values of some technology stocks. So, last week’s decrease was positive for many technology shares.

Even so, many investors are expecting it to continue rising this year, in what may be a sign of a more muted outlook for the fast-growing technology companies that have generated such strong returns in the recent past. This is arguably a good thing considering the high levels of speculative excitement that have characterised the investing landscape in the recent past.

“The FOMO market is over; it’s a more broad-based opportunity set now and a more ‘normal’ investing environment. Investors will be able to bide their time, waiting for openings,” suggested Johanna Kyrklund, Group Chief Investment Officer at Schroders and manager of the St. James’s Place Managed Growth fund.

The ‘fear of missing out’ (or ‘FOMO’) explains the psychology behind the wild price movements in some stocks that are popular among amateur online traders. It was a feature of the GameStop saga in January and February this year – which saw the share price of a struggling US gaming retailer shoot upwards as investors piled into its shares in expectation of a rapid rise. Some of them were right, but others were left with losses when the share price subsequently declined.

With an economic recovery on the horizon, it’s possible that markets are entering a calmer phase, suggested Kyrklund.

“In today’s markets a more boring approach – favouring diversification and judiciousness over more racy assets – may be what’s required,” she added.

Archegos – a storm in a teacup?

One of the biggest stories last week in financial markets was the implosion of Archegos Capital Management – an investment house whose higher-risk strategies involved borrowing large sums to buy financial instruments related to publicly-traded companies.

The news has already impacted other financial services businesses, with several investment banks reporting expected losses, or declines in their share prices. There were fears that the news could lead to wider disruption in the market, but so far most of the fallout appears to be limited to companies that had dealings with Archegos.

“There is no need to be concerned that this will lead to broader contagion. In fact, in discussions with policymakers over recent days, there is a thought that this may serve to tighten up regulation and risk management practices in areas of weakness,” wrote Mark Dowding of BlueBay Asset Management, co-manager of the St. James’s Place Strategic Income fund.

While the broader fallout might be limited on this occasion, that doesn’t mean there are no lessons for investors, he added.

“As Archegos reminds us, greed can often end in tears and investing should not be confused with the pursuit of chasing short-term speculative gains,” added Dowding.

COVID-19 in Europe

Even though the longer-term picture is bright, in the near term there was news last week that showed COVID-19 is still a disruptive force. In particular, several European countries have re-enacted lockdown measures in order to curb the spread of a new wave of cases.

France’s President Macron announced a four-week national lockdown on Wednesday last week. Similarly, Italian lockdown measures will continue to the end of April. Due to restrictions, Pope Francis gave his Easter message inside St. Peter’s Basilica to a small gathering, rather than to large crowds in the square outside.

Wealth Check

Two thirds of investors want greater transparency in where their pension is invested and the environmental impact it is having, according to new research from Aviva.1

Concerns about climate change have risen significantly among retail investors, with 73% of clients believing they have a duty to combat climate change.2

Investors are right to be thinking about the environmental impact of their investments: research shows that our savings can have 27 times more impact on our personal carbon footprint when invested sustainably, compared to other reduction activities.3

The effect is partly due to how long funds are invested for. Saving for a comfortable and financially secure retirement should span decades, as your investments grow and compound over time.

This is why responsible investing is a defining characteristic of our investment approach; one that will be crucial in aiming to generate returns over the long term as the effects of climate change become more prominent.

“Incorporating responsible processes into our investment decision-making provides the opportunity for us to use money as a force for good, and crucially, it makes investment sense,” says Sam Turner, Responsible Investment Consultant at St. James’s Place.

Investing to achieve your life goals while having a positive impact on the planet is one of the ways investors and wealth managers can work together to ensure financial wellbeing in a world worth living in.

If you’re interested in how we ensure your funds are a force for good, speak with your St. James’s Place Partner.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

1, 2 Source: Survey of 1,498 adults by Ipsos MORI on behalf of Aviva, December 2020

3 Source: Nordea, Sustainable Finance at Nordea, 2017

In The Picture

In the penultimate interview with our UK equity managers, Darren Johnson talks with Luke Chappell of BlackRock, co-manager of the St. James’s Place UK & General Progressive fund. Luke highlights the importance of access to company management teams, and how those who have been most responsive to the pandemic crisis will emerge the strongest.

The Last Word

“We have received overwhelmingly, so let us give generously.”

Justin Welby, Archbishop of Canterbury, urges Britons to be more generous in his Easter sermon

BlueBay and Schroders are fund managers for St. James’s Place.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). ©LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies.

“FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2021; all rights reserved