October 2020

Fourth Quarter 2020

View from the Square

They say it takes 66 days to form a new habit. After over six months of forced change to many aspects of our daily life, a new paradigm is emerging that is likely to have a profound effect on the next decade. Governments have realised over the summer that keeping all businesses on life support is no longer the right course – instead, focus on those industries, sectors and parts of the economy that are likely to thrive, rather than just survive, as we come out of this crisis.

Looking back over the last 100 years, each decade has broadly presented as a paradigm – a clear regime. For example, the 1920s were “roaring”; the 1930s were in “depression”; the 1970s were inflationary; and the 1980s were the reverse. Recent paradigms have included the debt boom and bust of the financial crisis in 2008, followed by monetary expansion lifting asset prices – increasing the wealth divide and leading to populist uprisings – in recent years. COVID has accelerated the shift to a new paradigm for which, like in previous decades, there will be winners and losers.  

Technology is the well documented beneficiary of the COVID crisis. The forced lockdown, followed by tight restrictions globally, has required us all to change the way we live, work, shop and communicate – and the digital world has been our gateway. Whilst we are sure that the world will not return to the way it was pre-COVID, technology is not the only beneficiary. The UK Government, and others around the world are using the next wave of support to tackle the climate emergency and other key future trends, focusing their help on those industries and sectors that are thriving in the new world. 

For that reason, we are looking beyond a handful of successful technology stocks to those regions and sectors, where opportunities lie that we feel are best placed to fare well as we move into 2021 and beyond, and where we do not believe share prices are excessive. We are minded to avoid significant exposure to deep value areas of the energy market and those that are simply in structural decline, focusing on those cyclical opportunities that we believe will emerge stronger than before.

Opinions constitute our judgment as of this date and are subject to change without warning. The information in this document is not intended as an offer or solicitation to buy or sell securities or any other investment or banking product, nor does it constitute a personal recommendation. Past performance is not a reliable indicator of future results. Forecasts are not a reliable indicator of future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it may go down as well as up. Interested parties should seek advice from their Investment Adviser. CS Investment Managers is a trade name of CS Managers Ltd, 43 Charlotte Square, Edinburgh EH2 4HQ. CS Managers Ltd is authorised and regulated by the Financial Conduct Authority. Registered in Scotland SC231678. Registered Office Edinburgh Quay, 133 Fountainbridge, Edinburgh EH3 9BA.


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