Risks pernicious or acute
Members of the most closely-watched financial authority in the world - the US Federal Reserve - yesterday named five risks they see in the offing:
The zero-tolerance policy of COVID-19 in China continue to disconnect supply lines around the world,
Geopolitical turmoil between Russia and NATO countries push energy prices still higher, and bring about shortages too,
The pandemic somehow worsens,
Wages grow faster than productivity, triggering a spiral of wage–price inflation,
Inflation breaks its moorings, and drifts away from longer-term expectations.
As uncertain as these conditions are, markets - in my opinion - did over-react in December-January. Perhaps that’s what the Federal Reserve hoped would happen; maybe saving it from raising interest rates to a level beyond the capacity of millions (billions?) of vulnerably indebted people to cope.
My priority being always to look for investments capable of withstanding risks either pernicious or acute; I regret I’ve no new themes yet to offer. What I do see are more ETF providers introducing funds on themes we already know - water, clean energy, cyber security etc - because they have proved popular. To have been in the vanguard of that trend gives me a sense of surprise and joy.
In case it might be of value to someone you know; I’d like to share a change of policy here at Dexterity. Prompted by seven factors -
Investment timing is a matter of luck as well as judgment,
We anticipate markets will persist volatile for at least another year,
We acknowledge the value of our work shows up only gradually,
Even though our fees are probably lower than most IFAs, our services come at a cost,
Clients have to take us on trust at the very moment when they feel most vulnerable,
We’re financially in a sound situation,
We’d like our clients to know we are with them through rough times as well as smooth,
- Philip and I have agreed from today - for clients investing via Dexterity for the very first time - we’ll defer sending our initial invoice until the investments we've recommended reach a profit equal to our bill. If that doesn’t happen within a year, we'll waive payment.