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Issue 33 - A Technology Bubble About To Burst Or Just the Beginning?

Like many professions, we have a requirement to complete at least 35 hours of CPD (Continuing Professional Development) each year and sometime that can be a chore but in many ways, it enforces a discipline which has a benefit beyond “ticking a box” for the Regulator.

This week, I have excelled myself, having completed over 7 hours covering a range of topics. The one I wanted to talk about now is related to the future for investment markets and the question in my title for today – is the technology bubble about to burst and linking in with this, to take a look at what is changing in the investment world as we hear more and more about ESG!

Without a doubt, the technology sector is what has been driving markets in the US to record levels and to a lesser degree, on a global basis. The result has seen the value of some of these Companies increase exponentially and the concern is that they become artificially inflated values, which sooner or later will result in the bubble bursting! However, as a backdrop, we also have to consider some of the factors which have been a driving force behind their success in what has become an ever increasingly changing environment.

The Covid 19 pandemic has played its part as we have seen with Companies like Amazon and other home delivery companies. Names like Deliveroo and Just-Eat finding success in the takeaway delivery sector and so on. These are not fads that are going to pass anytime soon but are rather an indication of how our future shopping and convenience expectations are going to evolve.

So rather than there being concerns about technology bubbles bursting, the sector looks set for further growth and in particular, the UK technology sector is likely to start playing catch up as it has been lagging behind really since 2016 when we had the EU referendum. Brexit is now behind us and although the fallout is only starting to manifest in some areas, other opportunities are being identified and explored.

Once again today, we have Minutes of the Bank of England’s last monetary policy Committee Meeting showing that near-term forecasts for the UK economy had improved further and despite increasing borrowing costs from increasing Gilt yields, they voted unanimously to keep interest rates at their historic low level of 0.1%.

With the increasing focus in many sectors on ESG, Environmental, Social and Corporate Governance, sometimes referred to as sustainability, this is likely to become a norm within quoted companies large and small. With this in mind, Fund Managers are now increasingly turning their focus to impact investing, where they can identify investment opportunities in Companies where they can have a direct impact on the outcomes of those organisations.

I am therefore of the view that a combination of impact investment strategies and technological advances will be key drivers in the markets going forwards.

Turning our thoughts now to the pandemic, what extreme headlines we have seen in the last few days from a number of European countries suspending delivery of the Astra Zeneca vaccine due to blood clot concerns and fear mongering that UK supplies will be severely reduced in April on the one hand, to the 25M+ first vaccinations in the UK which have been successfully delivered. As always, these headlines get exaggerated and as a simple soul, I have to question the logic of suspending a vaccine which potentially could have led to blood clots in a small number of cases; 37 people out of 17 million vaccinations delivered in the UK and Europe versus the infections prevented and lives saved. The World Health Organisation even stated that the actual number of blood clot incidents were statistically lower than would have applied in the same population number in normal times.

Yes, we should question these things, but this would seem to be unnecessary politics taking an extreme position at a time of global crisis – does it really help I ask myself or is this a smoke screen to deflect attention from something else I wonder?

As for the shortfall in doses in the UK, well that would all appear to depend on what starting point you choose! In reality, we are on course to deliver a first vaccination invitation to all over 50s by mid-April and the whole adult population by the end of July. The second doses will now start to accelerate as well, and they too are on track. My observations suggest it is the hoped-for accelerated rate of vaccinations which was being suggested in some circles a week ago which will not now manifest as surmised but otherwise we remain in good shape for an on time roll out.

And finally I say, beware the statistics – as was popularised by Mark Twain in the US, “There are three kinds of lies; lies, damn lies and statistics.” I think that says it all.

And to close, once again, well done the NHS and all the front line workers who have made this possible.

As always, take care and we will keep in touch.

Best wishes

Richard, Chris and Lesley

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