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It is time for another update

Satis Wealth Management

I am pleased to report that I and my colleagues continue to work effectively, largely from home. The technology works very well 80% – 90% of the time. When it fails it is pretty frustrating but this is increasingly rare – well done IT. ( We have had some difficulties with our telephony software and have decided to replace it. If you have any difficulty telephoning us please use the mobile telephone numbers of the planners, thank you. )

We are conducting a great many meetings by Zoom, and a few by Skype, Teams and other means. We are getting better at these meetings and have realised that several a day of these can be quite hard work. On just a few occasions we have met clients in their gardens or at our offices in Watford and London. Our offices have been carefully rejigged to be sensibly safe with lots of sanitiser, Perspex partitions and so on. I have very much enjoyed the few face to face meetings I have had; they are better than any virtual meeting.

We will gently and in line with government guidance slowly have a few more colleagues working from our London office.

The investment world

Last week was great for headline writers. Apple became the first company to have a market capitalisation of $2 trillion – that is more than the market capitalisation of the UK FTSE 100. The UK National Debt went over £2 trillion for the first time and the previous month (June) was the first month since the 1960s that debt was greater than 100% of GDP. The S&P 500 reached a new all time (intra-day) high – the market has recovered to its pre Covid high in less than 6 months.

While there have been a slew of positive articles it is certainly not the case that markets have recovered and are back to normal. The most striking factor is how uneven the market recovery has been. The big tech stocks are going from strength to strength while others (airlines for example) are in deep trouble. I will not write about dividends in detail again,  but do not forget that dividends have been very significantly reduced (445 London Stock Exchange quoted companies have cancelled, suspended or cut dividends in the last 6 months) and also that corporate earnings, in aggregate, have also declined by approximately 25% (the exact number depends on your data set).

Bond yields have fallen still lower so the cost of this debt is very low by historic standards.

For many observers (me included) the printing of money makes us nervous about future inflation. The least bad inflation predictor is to compare the returns on identically dated conventional gilts and index linked gilts or in the US compare Treasuries with TIPS. This method has not shown any significant uptick in UK inflation expectations but in the US the number has moved back to where it was pre Covid (about 1.3% per annum). Many clients are nervous about inflation.

I was interested to read Silvana Tenreyro’s piece on this topic. Ms Tenreyro is Professor of Economics at LSE, and studied for her Masters and PhD at Harvard. She is a member the Bank of England’s Monetary Policy Committee. Ms Tenreyro looks back at inflation during previous pandemics as far back as the Black Death. https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/covid-19-and-the-economy-speech-silvana-tenreyro.pdf?la=en&hash=94DE5B4F39A84E537341F3D0C35DE5F651D45E7C

Her conclusion is that pandemics are generally deflationary. This clearly dampens inflationary expectations if you buy the theory. The paper is hardly cheery – her central case is for an “interrupted V” shaped recovery. There is also an interesting section on how comfortable the British public are going out to a cinema or restaurant.

The other recent new factor is a weakening US Dollar.

How does all this shape our advice? We seek to help clients arrange their affairs robustly. In practical terms that means a very widely diversified portfolio. A weakening dollar does not alter our views. Markets react in milliseconds to “new” news. There is no point, indeed it is a high risk approach, to try and second guess the market. If inflation takes off, we (you) have the exposure to Index Linked Gilts. If equities collapse we (you) have high quality bonds. Our faith is in capitalism and its ability to preserve and reinvent itself. If this all sounds reassuring there are as always counter arguments:-

  1. What if asset correlation changes? All assets, equities, bonds and property decline in value and do not recover. Diversification is a bit pointless. This is not a theoretical whimsy, cross asset correlation has been growing for the last few years
  2. What if the world economy enters a prolonged period of deflation? The last significant deflation was the Great Depression. After the Depression the stockmarket did recover but reading accounts of those who lived through the 1930s is a sobering and scary process.

We see no compelling argument to alter our advice. Ensure that you have enough cash put aside for a rainy day. Weak dollars, ultra-low interest rates for governments and miserable deposit rates all have their upsides.

Do not look at your portfolio too often. If you have any concerns please contact us

BS

What our clients say

As an American residing in London, I have complex tax requirements having to file both in the USA along with the UK.

Satis Tax has not only undertaken this massive assignment with rigour, but more importantly, it has been the very personal engagement and insightful counselling that has shaped the relationship beyond the professional requirement. Their work undertaken has been flawless in its execution. Without hesitation I would recommend their services to all those that require a level of professionalism that goes beyond a remit.

Carol
London

Ross Badger, and now his team at Satis Tax, has been handling my US and UK tax affairs for almost 25 years. Aside from the high quality of the firm’s work and its tireless effort to ensure that tax planning in both jurisdictions is as efficient as permissible, what I have particularly liked is the unstinting personal service that Ross and his colleagues provide. But, perhaps, the best indication of my satisfaction with Satis’ work is the numerous clients I have referred to the firm all of whom have been equally happy with their experience.

Bob
London

Although tax time is no fun for most people Satis Tax makes it easy and painless. Their knowledge of both US and UK tax requirements along with their quick response to queries has enabled me to spend more time on other pressing issues.

Rita
Phoenix, AZ

One or more of the Satis Tax principals has been handling my personal taxes, both US and UK, for over 35 years. That fact speaks for itself. Several aspects of Satis' work impress me: 1) Thorough understanding of both the UK and USA tax systems; 2) Attention to detail; 3) A conservative approach combined with an appreciation that for the client "every dollar/pound matters" when it comes to limiting one's tax liabilities.

Mat
Montana

Having decided to emigrate to the U.S., I was completely unprepared for how complex the interaction between the UK and US tax systems would be. From initial tax planning advice prior to emigrating, several subsequent complex business transactions, to filing both our UK and US annual returns, I’ve always felt assured that Satis have a complete understanding of the complexities of the tax regulations. This has freed us from the worry of tax compliance in both countries. Over and above keeping us complaint, they have been an invaluable sounding board when we have found ourselves facing personal decisions that have had tax consequences through the years we have been living in the US.

Rob
Florida