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The key thing I’d highlight this month is actually the downside protection – Cautious Income is down 2.2% from the recent peak in early September vs a 7.8% fall for the S&P 500 and 9.4% for both the Nasdaq and FANG+ indices (not saying they deserve to be compared but many have done so whilst tech was going up!).

Yes MSCI World is flat year to date (to the 25th unlike data below), but we know that has been almost entirely driven by the performance of the mega cap growth / tech stocks which we naturally do not have much exposure to in the Cautious Income fund, given they pay little to no income.

This week heralds the start of the final quarter of 2020. What an extraordinary year it has been thus far. Of course, for investment managers, the key area to focus on is what next? This question can have multiple different dimensions. For example, the answer might be very different if we are focusing on the long term as opposed to the short term. We have made the point repeatedly that in the long run we will cast this virus off. It remains a truism that the virus is not unpicking the very fabric of society nor is it destroying the functioning of capital markets and as a result, from an investment perspective at least, we will get through this.

The pattern of market performance since the March lows continued unabated in August: global equities strong, led by the US and within that tech stocks; high yield bonds, emerging market debt and convertible bonds outperforming safe haven government bonds; inflation protected bonds performing well; precious metals strong; and the dollar weak. The S&P 500, with a 7% rise, reached new all-time highs, dragging the MSCI World index to a new high, despite many of its other constituents remaining well below previous peaks. Within markets, tech stocks and other winners from the pandemic continued to forge ahead, the NASDAQ index rising 10% to new highs, while sectors most exposed to the damages wrought by Covid, including financials, real estate and leisure, continued to suffer.

This year has obviously been far from normal and the Covid pandemic meant the US Open, normally held in June, was pushed back to a late summer week in September. The US Open is regularly dubbed the ‘toughest test in golf’. One of the reasons is long, thick grass (known as rough) which sits unsettlingly closely to the finely manicured fairways, punishing any marginally errant shot. Within equities, growth exposure has been the equivalent of finding the fairway this year, whilst sole exposure to value has been akin to hacking through the deep rough.

Realpolitik is the art of designing policy based on practical rather than ideological considerations: what works, not what we think should work. Pragmatism is an important part of investing and tells us that positioning too aggressively around political events like Brexit and the US election is risky, because both the result and the market outcomes are difficult to predict. Given a low probability of correctly predicting either, we need to see evidence of significant mispricing in order to introduce large positions in our portfolios.

Gold has outshone most other investments in 2020, having broken through to new all-time highs in July, surpassing levels last reached nearly 10 years ago. Year to date the bullion price has increased by 27%, trumping all broad equity markets and most other assets – only the tech heavy NASDAQ index has kept pace. Over five years, gold has risen by over 70%. Today’s market and economic conditions go a long way towards justifying these gains though and we remain committed holders within our multi-asset portfolios.