Author: Michael James

You have to keep your financial advisor and market advisor on their toes.

Dear Graeme

Hope I find you well during this lockdown?

Why are the UK Bonds not doing well, compared to the UK Equities?

I notice silver took a big hit in the last week, why was that?

The markets appear to be very happy with the USA election predicted result (America is strange) and the announcement of the possible COVID19 vaccine.

Will Trump not accepting the result and suing cause any issues with the market?

The response –

Dear Michael,

Sorry that I did not answered you email first thing yesterday morning but for some strange reason my computer had decided that your emails should go straight into my “junk” folder. I have now sorted this with IT so it should not happen again.

Turning to your questions:

I’m well and really not too worried by Lockdown II.

Bonds tend to move inversely to equities, but this situation has not necessarily been the case over recent years as Central Banks have been pumping in liquidity through quantitative easing. Generally as a rule of thumb if investors are feeling confident equities prices will rise and the money for these investments will come from the fixed income (bonds) part of portfolios. Likewise in periods of risk off, equities will fall in price and bonds will gain in value as investors seek to protect capital values. The price of bonds will also move as interest rate and inflation expectations change.

Silver/Gold is similar to bonds in that they tend to move inversely to equity prices. Investors see the shinny metals as preserving capital. The price of silver has been weak recently as investors have being buying equities on the hope that the world economy will be back on its feet soon given the positive vaccine news.

The US election result (assuming Trump’s law suits come to nothing) could not have been better, Mr Biden winning but control of the Senate remaining with the Republicans. This will mean that Mr Biden will not be able to raise taxes as high as he had wished.

I do not believe that Mr Trump will cause too much disruption as he is very much on his own, with party members starting to distance themselves from him. However given what we know of Trump we cannot discount this in full.

In general we are still confident in investing in equities but in the near term we are likely to see periods of volatility as Covid infections rates rise.

If you have any further questions, please do not hesitate to call.

Best wishes

Graeme