• Stephen Walters

After fret and agitation

After eight months of fret and agitation - lest I’d led loyal, trusting clients up a creek - I write with a sense of relief that Dexterity’s clients seem to agree with me our global thematic and mostly-ESG approach makes sense. This blog offers my current perspective, and where I look to invest for the future.


Background - misinterpretation, confusion and unreadiness

  1. In December 2021 governors of central banks admitted their hope that inflation would only briefly rise - spike at about 2.5% - was unrealistic. Now with inflation around 10% in UK and USA, the governors’ chief aspiration is to avert recession; achieve a ‘soft landing’. I bid them ‘good luck with that’.

  2. Along with the climate crisis and its challenge to capitalism - plus economic superpowers at odds with each other, and internally riven too; drought and food-scarcity in poorer countries; Russia’s war, and sanctions in both directions; the cost-of-living here in UK; fallout from Brexit; China’s economic slowdown; technology’s threat to democracy, and recovery from the pandemic - there are impacts and consequences too numerous and convoluted for me to untangle.

Assessment - mostly bleak, dire and grim

  1. UK inflation’s rampant. Worse is to come and, on the subjects that really matter, our UK political ‘leaders’ are inaudible.

  2. Central-banks around the world are reluctant to raise interest rates to levels that would stem inflation promptly. My guess is some governments - as well as millions of mortgage holders - would find the repayments too high to sustain, and central bankers daren’t precipitate another global financial crash.

  3. Instead, they’ve chosen to penalise cash savings; shifting the burden of inflation from the backs of debtors to the shoulders of creditors. I judge it a tax quietly imposed upon those least likely to protest, and tolerated in silence so far.

  4. Of international political collaboration on climate change I despair. For the Net Zero 2050 project I grieve, and for our grandchildren, because climatologists tell us we’re not cutting emissions fast enough to prevent runaway environmental damage.

  5. US Congress has at last chosen a bold action. Of course it’s not nearly enough, but it’s an estimable example. Mr Biden’s Inflation Reduction Act will release $370 billion towards combatting the climate crisis. Anticipating its introduction, markets rose through July and August… until last Friday.

  6. The Federal Reserve’s Governor that day spoke of raising interest rates, “using our tools forcefully…some pain”… “inflation persistent for some time”. His actions are surely appropriate, but instantly markets slipped, and I expect they’ll fall further.

  7. My own confidence is fragile. Stock markets’ performance over the last twelve months, and their volatility since the start of the pandemic, are the worst I’ve known since I began this work in 1989.

  8. For me, the most awkward factor in successful investment is always timing. By recommending funds I hope we may all hold for life I try to weaken the power that timing wields. Over three-year periods and longer, even defensive funds have well-surpassed what cash would have earned in interest, so for inured clients the inflation/invasion impact on values has been less pronounced.

Questions and answers


Would I sell any of our funds? Mindful cash is currently not an attractive alternative; of the five reasons I hold good to sell, I judge:

  • The inflation and invasion stories changed faster than I could recognise, and the moment for selling is long past.

  • Unless the fall in value of your portfolio over the last twelve months will affect your present standard of living, I’d hold.

  • Unless you’ve a discerned purpose for any of the capital within the next eighteen months or so, to stay invested may be more profitable than cash.

  • Were your financial peace-of-mind suffering persistent disturbance, then to move into more defensive funds would make sense.

  • Looking for any ‘better’ funds; I regularly check the inventory of UK Global thematic ETF, and see neither any new themes consistent with ESG values, nor any more-competitive versions warranting a switch.

Would I put any of my funds on probation for the next six months? Yes; Rize’s Sustainable Future of Food, L&G’s Healthcare Breakthrough and Kraneshares China ESG:

  • At the performance of Rize’s FOGB ETF I’m feeling disappointment. To improve the ways food is grown, processed, stored, shipped and delivered seems to me essential, and the ETF is presently unique. Maybe we’re just too early; like 2008 was too early for INRG.

  • In DOCG’s six- and twelve-month performance I’m feeling dismay. Accepting it has a unique ‘breakthrough’ focus which renders it more volatile than the four other ETF tracking Global Healthcare; they seem to be steadier. Maybe one of those would be more profitable in the long run.

  • Accepting China ESG’s one-year performance has been painful; in my opinion the prospects for China make the fund worth holding long-term.

Were you to have more cash to invest, where would I recommend investing it? I’d add it - gradually - to ETF tracking indices of clean energy, fresh water, healthcare, food and infrastructure.


Do I rebalance my portfolio? Yes, as a way of selling ‘high’, and moving profit to themes in which I still have faith but which haven’t yet prospered as I’d hoped, occasional rebalancing is a valid action. It’s also a useful way for me to to make conscious any unconscious bias I have about any theme.


In conclusion

From people better-informed than I am about climate-change and geo-politics, I hear there are reasons for hope. I wish I could agree. On the curve below, I place myself between despondency and scepticism. My inclination is to be defensive, but nowhere is there any inflation-beating financial safety.

My own faith - sometimes shaky, because progress is erratic - is in themes I see as essential towards Net Zero 2050.


Since markets began to slide last December, only one Dexterity client has wondered aloud to me about selling. What that says about our clients I’m not sure; I’d like to think we all accept we’re in this for the long-term.