Questions from our recent investment panel live stream

At our recent investment panel discussion live stream (click here to watch a recording of the event) Equilibrium founder Colin Lawson was joined by Gervais Williams, Head of Equities at Premier Miton Investors, and James Ashley, Head of International Market Strategy at Goldman Sachs. They discussed the impact of the coronavirus on investing and global markets.

Below is a summary of some of the questions asked on the day

Governments printing money usually leads to inflation in conventional economics .However, does this apply when most governments globally will be applying the same medicine at the same time?

What is the expectation with regard to inflation in the medium to longer term?

In the short term inflation will be lower. In the longer term it could go a bit higher than it has been recently, though not runaway inflation. We’ve had inflation in the UK but offset by low cost goods from overseas. Perhaps those goods might not be so cheap in future. Governments might like a bit of inflation as it would reduce debt levels in real terms.

What are the implications for trade relations with China?

Will the world fine or impose tariffs on China for a generation or more to pay for this ?

Fines are unlikely but trade relations could be re-configured. Perhaps some supply chains will move away from China.

Notwithstanding dividends the FTSE 100 has gone nowhere in 20 years. This compares badly with say the S&P 500. The recovery in the FTSE thus far has also badly lagged. Is there a systemic problem with UK large cap companies as wealth generators?

Does Gervais know of small companies who are actively looking for UK suppliers or setting up new manufacturing?

UK has less tech than many other regions, which have driven returns elsewhere. We’ve also seen anxiety regarding Brexit.

It does seem likely that many companies may move supply chains more locally. Large companies need high levels of economic growth to see their share prices increase, whereas small companies can thrive. The UK will be the leading market in the world for small companies going forward.

Do you think we will see an increase in the robotics and AI sector due to this global event?

This secular trend was already underway and this is being enhanced by the current events. Valuations of some technology stocks may already reflect this partially but it is a long term trend. However, there are some companies who are loss making and have been driven by “free” borrowing, so it is important to be selective.

The oil industry had a poor long term outlook due to switch away from fossil fuels. Do you see significant oil industry impacts accelerated by Covid 19 / oil price decline?

We need to invest more in renewables but we will still need carbon based energy for the next 5 or 10 years. There could actually be a shortage of energy going forward which could drive oil prices much higher, which could then impact on growth.

The uncertainty following the pandemic, and thus a return to some sort of normality, will only be properly addressed once an effective vaccine is administered widely to the global population. How far off do you think this is?

The experts say 12 to 18 months and we have no reason to question this. It is probably true that we only return to full normality when we have a vaccine. The speed of recovery and which companies will prosper will be driven by what exit strategy is decided upon.

Will Governments take a stake in companies when they provide support funding and what impact will this have on companies and the equity market?

They may well do and it is tremendously important that we make sure that small companies in particular cannot just survive, but take advantage. We want then to be buying up assets from the failing companies which will make sure that there are still jobs for people and it supports the economy.

I have £75,000 in low interest savings accounts, what would be the recommended best investment option(s) for this cash?

Whilst we can’t give personal advice, we think it is a good time to invest right now given the very low rates on cash.