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Global Matters Weekly – Staying the Course

As we come into 2021’s home straight, few moments can match the drama and rivalry that played out yesterday in Abu Dhabi as the Formula One season drew to a close. A nail-biting final lap decided the 2021 championship after the two key protagonists, Lewis Hamilton and Max Verstappen, started the race on equal points. Even those not of a petrolhead persuasion would be hard pushed not to have enjoyed the spectacle. The lesson of the day was to never give up. In the highly competitive sports arena, we’ve seen countless times how victory can be snatched from the jaws of defeat. Whilst investment is a different game altogether, similarities can be drawn between our industry and theirs.

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Viewpoint – November 2021

The buoyant markets of October continued through most of November, taking several equity indices to new all-time highs, until news of the new Covid variant, Omicron, at the end of the month reverberated globally and sent equity markets into their sharpest one-day falls of 2021, pushing all major markets into negative territory for the month.

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Global Matters Weekly – Death of the traditional retailer or just poor operators?

The last decade or so has seen traditional retail undergo a structural change. Rapid growth of e-commerce, everchanging consumer habits and increasing competition have all been cited as culprits responsible for the ‘death of the high street’, but the real culprit is bad management.

The onslaught of the pandemic last year witnessed the highest number of store closures in the UK since the global financial crisis, taking down household names such as Debenhams and Topshop’s parent company Arcadia Group in its wake. The pandemic isn’t wholly to blame for the failure of these businesses though, it was more of an accelerant, bringing forward the eventual demise of these badly run businesses.

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Global Matters Weekly – Opt Out

It is hard to know what is going to happen. While people like to hear a single view about the outlook for the global economy, with plenty of point forecasts for key variables like growth and inflation, the future is in fact best expressed as a range of possible outcomes; see my colleague Lorenzo La Posta’s blog from two week’s ago (“Embracing Uncertainty”) for a good explanation of what this looks like in practice.

If something is hard, most of us would like to opt out. One way to do this is by investing in secular growth stories: no matter which way the wind is blowing for the wider economy, these businesses continue to do well as they take market share from other areas and come to account for a growing proportion of spending.

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Global Matters Weekly – Gradually and then Suddenly

Spotting dangers and threats can be a difficult skill; not least because they often hide in plain sight. The physical act of literally seeing a danger can require a deliberate act of searching it out. For example an object such as a car or aircraft you are on a collision course with is often masked by the fact that the relative angle between you is constant, thereby it appears stationary. If the eye does not detect an angular change then it can be literally blind to it until the final moments before impact when its relative size in your field of view blooms to a large size, at which point evasive action can be too late. It is due to this optical phenomenon that to spot the danger we need to move our head around in our scan to create an angular change for the eye to spot.

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Global Matters Weekly – Embracing Uncertainty

Today, uncertainty takes many forms. It revolves around inflation, supply chains, energy prices, interest rates, wages, growth and more. Is the current bout of inflation more than transitory, or will inflation indicators turn down towards the widely used 2% target any time soon? When will disruptions to global trade end? Will labour
shortages and raw material supplies come back to normal? Is there such a thing as ‘normal’ anymore, or are we heading towards a ‘new normal’?

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Global Matters Weekly – Diversity of Time Horizons

A commonly accepted definition for market efficiency is “the degree to which market prices reflect all available, relevant information”. Given the speed with which news is now disseminated around the world, along with the rapid growth in algorithmic trading, one might expect markets to be reasonably efficient.

I am going to introduce a new concept that we take advantage of called, “diversity of time horizons”, a phrase coined by Lyrical Asset Management; and also outline some examples that demonstrate how irrational investors can be at times and the extent to which time horizons can diverge.

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Global Matters Weekly – No Mr Bond(s), I expect you to fall

I recently went to see the latest James Bond film to watch Daniel Craig’s last appearance as the British superspy. It was Craig’s fifth outing since his introduction in 2006 and the latest release marked a rather explosive end of an era in the latest storyline of 007. In our slightly less glamorous world of investment management, might we be facing an end of an era moment too? Since 2010 inflation in G10 countries has averaged 1.5%, below the typical 2% central bank target. This year we have seen inflation move sharply higher and whilst much of the narrative has suggested these moves are transient in nature, events in the past few weeks have posed a valiant challenge to this view.

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Global Matters Weekly – Talk is Cheap

The ability to explain a concept or subject to someone else is a challenge. It requires you to both understand the topic you have been asked to discuss, but also communicate it in a way that is understandable to the listener or reader. Listening and reading are two of the most important activities in our industry. After all, we have two eyes and two ears, but only one mouth.

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Global Matters Weekly – Why we pay attention to seemingly small risks

When it comes to risk management, a little bit of paranoia is probably a good thing. This applies when managing your finances, but history tells us that it is even more critical in the field of aerospace engineering. On the morning of 28 January 1986, the crew of the Space Shuttle Challenger tragically fell victim to one such failure as their spacecraft disintegrated a mere 73 seconds after launch. The cause of the accident was a seemingly insignificant faulty part, namely the rubber O-ring. These O-rings were a mere 7.1 millimetres in diameter, yet the malfunction had the gravest of consequences.

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