2019 ReturnsPortfolioBenchmark
Adventurous Portfolio21.22%18.02%
Moderately Adventurous Portfolio20.42%17.19%
Balanced Portfolio18.96%15.65%
Cautious Portfolio16.93%12.24%

Those who bravely waded through the issues discussed in last year’s Annual review will know, there was a veritable smorgasbord of righteously concerning stuff looming for 2019.

Possible 2019 nasties included

  • Hard Brexit
  • Major economic damage from China v USA trade dispute
  • A potential Labour Government
  • Rising interest rates in the US
  • Markets believing a global recession was imminent
  • Continuation of global stock market losses (see above)
  • Falling property valuations
  • Trump in general

That was the year that wasn’t

But…….. no nasties came to pass, not a single one. Ok, apart from Trump in general.

It turned out as an investment year to be the equivalent of a ‘virtual reality’ ride. To explain for those who haven’t recently visited a theme park, it’s where you sit absolutely still and have the sensation through VR that you are taken here there and everywhere on a hectic, scary journey. In reality you never actually move but it sure feels real.

What did happen?

Again, referring back to the last review, we also highlighted several individual stock valuations which had fallen considerably. By then, relating them to their ongoing profit and growth metrics we indicated we thought it an unwarranted sell off in markets and therefore an excellent opportunity for investors who could ”Keep calm and carry on”.

Brookfield Asset Management in 2019 is up 52.34%

Apple is up 89.03%

The US S&P 500 index in totality is up 29.16%

The Global REIT ETF which represents the world’s commercial property sector is up 21.38% plus paid healthy dividends.

What’s next?

So let’s chunk down to the implications of all that didn’t happen, going forward.

Before we do this please know that nothing written is any more than our best efforts at an honest and unbiased analysis of the current facts and potential outcomes.


We entered 2019 with Brexit being viciously debated in the House and no obvious way through an almighty mess. To cut a tortuously tortured story short, we ended with agreement on the basic terms of leaving in January 2020 and until December to finalise the Decree Absolute.

The Conservatives, post-election, have 5 years with an overwhelming majority and a fractured, wounded opposition. Boris is free to do as he will. No need now for compromises with the DUP (goodness they must want a do-over), no imperative to pander to hard-line internal factions (please oh please can we endure Jacob Rees Mogg no more).

But all the above does not add up to a booming UK in 2020, because Brexit is by no means done. In reality, the hard part starts now.

The last 3 years have fundamentally been concerned with do/how we Brexit?

The question now and it’s hugely complex, is on what trade terms? It’s all about the details from here, which won’t get the same lurid headlines but is where the red bloke with the horns hangs out.

We think it’s instructive that the first shot Boris fired post-victory was that the Bill to leave will be the first order of business, but adding the legal prohibition of any extension of trade negotiations with the EU beyond December 2020.

In effect, putting a potential No Deal Brexit back on the table.

He did this, in our opinion, for two main reasons:

Firstly, the UK has little bargaining power beyond an overarching appeal for Europe to be good chaps and cut us some slack. As much as it’s playground politics, the leverage is improved if Boris does his ”mad, bad and dangerous to know“ thing and convincingly sells that we’d rather walk than be walked over. His hero is Winston and it’s not hard to imagine the great man fighting with implacable grit and gusto for the Greatness of Britain. Expect Boris to be doing his best Churchillian impersonation.

The second reason is more economic. One of our concerns for portfolios was that a strong Conservative victory and a Brexit resolution (stage 1) would result in a big move up in Sterling.

Now governments and their central banks have 3 main ways of affecting their economies.

  1. Monetary Policy (controlling interest rates)
  2. Fiscal Policy which is tax, expenditure (deficits plus infrastructure)
  3. Currency (everyone wants theirs lower)

The currency option is highly contentious and a major potential area for future upset geopolitically.

If a government artificially creates a fall in their currency then they make their exports cheaper, tourism to the country less expensive etc. This is seen as cheating especially by the US who are convinced China does it habitually.

Boris did his bit by putting some hard Brexit fear sur la table, and instantaneously halted the Pound’s rise. Et voila!!

So we think that UK markets will recover some underperformance, which means outperform (less Brexit anxiety and no chance of a Corbyn government are both positives) but there will still be Brexit uncertainty.

Property values have fallen the last 7 straight months which was due to Brexit concern and fear of a Labour Government, so 2020 should be positive with mortgage interest rates at 1.3% for a 2-year fixed rate; lower than inflation!

To round off the Brexit bit, do we do a deal with the EU?

The answer we think is likely to be ‘yes we do’, but expect it to be a rancorous road and an agreement made at the 11th hour.

The U.S.

We have written many blogs on the US because discussions of global markets which doesn’t put them centrally is like excluding the Queen from a review of the monarchy.

Donald’s nonsense has inflamed Nicola regularly to such levels of mouth frothing fury, the only option was to buy a large Trump doll and put it on a desk staring at her. She was beyond thrilled! Donald doll has since apparently embraced self-harming with numerous sharp objects sticking out of him.

There is, however, no escaping the reality that if judged solely on the US economic performance then he’s winning. The US economy is rocking and now the Federal Reserve has dropped interest rates, the dollar has weakened a bit and with other economies showing signs of life, it’s not obvious why this won’t continue.

The phase 1 China deal is apparently done, although very long on stuff China have yet to agree (‘sometime but not now’ is the negotiating equivalent to the end of a rainbow. You think you can see it but you just never get any closer). But it looks like a win for the BIG D and that’s a lot of what mattered. If he gets re-elected and more of that in a moment, then it’s quite possible he really goes for it with China. That’s a worry we can leave to 2021.

The big 2020 event that will move markets significantly whatever happens, is the Presidential election. The Democrats had a fairly steamy flirtation with the very left-leaning Elizabeth Warren up until September and then Barack did a single interview in which he said on balance he felt it was ‘not ideal’ if candidates made promises that, given the reality of Washington politics, could not be delivered on. Since then ardour has cooled considerably and Biden looks the likely nomination. If not he, then another more centrist candidate.

The Democrats cannot help but be cognisant of the recent Labour Party experience.

Labour plainly polled their supporters pre-manifesto on whether they would like free internet, their loans repaid, a 4-day week and unlimited access to fluffy kittens. Unsurprisingly the response was highly favourable.

The reality of any UK or US election though is that somewhere between 60% and 70% of voters already know how they are going to vote. The game is decided by the split of the undecided and they generally sit between the two parties philosophically, not to their right or left. Extreme candidates don’t appeal and partly why the Labour Party fared badly. They will likely have to re-embrace something resembling a Blairist Pink Labour/Democratic/Liberal agenda to become an electable proposition. We think Keir Starmer offers them the opportunity to do this.

Does Trump win in November? The smart money is currently saying yes, he probably does but from a purely economic/investment perspective it matters less if he wins than the alternative candidate. An Elizabeth Warren Presidency is not going to be for the financially faint of heart.

Interest Rates

We spend a huge amount of time discussing this topic; it’s the single most important variable factor for investment allocation.

Our view for the foreseeable future is that rates around the world are going to stay pretty much where they are currently. Maybe with a gentle move up if global inflation reignites but only gradually.

If true, that means that ongoing yields from bonds (which don’t grow in capital value but pay interest) are going to remain at historically low levels and barely above inflation.

Cash is going to lose value annually as the interest paid is lower than inflation.

We therefore think that assets which provide growth and yield such as commercial property, infrastructure and shares are likely to attract the bulk of new investment funds so positive for their performance.

As Sheldon would say, “Fun Fact”

Which is the best performing market in each of the last 4 decades?

From 1980-1990: Japan

Starting value 6749 – End value 37274 (Current Value 38681 so last 30 years of virtually no growth)

From 1990-2000: Europe (using the German market as a proxy)

Starting value 1443 – End Value 7987 (Current value 13221 (didn’t get back to 2000 level until 2014))

From 2000 – 2010: Emerging Markets

It is difficult to give an exact growth rate for EM because it depends on the allocation to each country but broadly the sector was up a shade under 50% for the decade. Other main world indices were all negative. Since 2010 though it’s not been great, with little increase in value.

From 2010 -2020: USA

Over the last decade the S&P 500 is up around 220%.

By comparison the FTSE 100 UK index had a value of 6060 in 2010 and has a value today of around 7600 which is a 25% increase over 10 years. Staggeringly the value was 6930 at the beginning of 2000 so it has risen around 10% in 20 years or 0.5% p.a.

What does this tell us?

The two obvious conclusions (given the poor subsequent performance of each decade’s star market) are firstly that US markets have overshot fair value and will be poor. Secondly, the best area for the next decade will probably be either China or India, as it’s their turn.

Part or all of the above may be true but we suspect the next 10 years will not predominantly be about a best country or region. Rather the ‘best business areas and the best companies in those spaces’.

We think we are close to a point where companies that dominate say the Technology sector are such powerful embedded entities, they are becoming universal and therefore effectively stateless (certainly they have better balance sheets than most countries).








To name a few.

Quite plainly the future is going to be influenced predominantly by technological inventions and applications. This includes AI, computer chips and software, battery technology, biotechnology and medicines, computer controlled medical devices etc. The growth and profit drivers for companies who succeed will be global. Companies in these areas will have huge addressable markets and massive demographic tail winds (the West is ageing so health spending will rise exponentially). Their growth rates and profit margins, often with little ongoing cost of scale, are simply unimaginable for old world industries.

It’s worth noting the estimate that over 50% of future Global growth will come from the Far East, so Asian technology companies may do especially well if China is not easily accessible to US companies.

The House of Mouse

To finish, on a story which began in 1928, when a man named Walt made a black and white cartoon called ‘Steam Boat Willy’, featuring a mouse.

Walt Disney (The House of Mouse) was assumed by the majority of investors in the 5 years prior to 2019 to be one of those old-world companies whose future was bleak, with the likes of Netflix using streaming technology to dominate.

The share price of Disney at the beginning of 2017 was in the low 80’s, with a PE ratio of around 16 times’ earnings.

One of the most iconic global brands and a preeminent Media content business with global reach, was selling at a valuation less than the average company in the S&P 500. This also was at a time when everyone agreed that content would be the deciding factor for long-term success for streaming platforms.

Netflix by comparison was a fantastic streaming platform but was then and still is today hugely reliant on buying 3rd party content at ever increasing cost. Not withstanding the market loved it and the shares traded at a P/E ratio of around 300 times, still today above 100.

The point here is the old are not all going to be swept away by the new. In the case of Disney and their library of content, their ownership of Marvel, Pixar, Star Wars, purchase of Fox with their library, ESPN sports network, ABC TV, Disneyworld/Land etc etc makes them untouchable in terms of prize assets.

So they didn’t have a streaming service and that’s what the market was in love with, but that was fixable and now they have. Disney Plus launched on November 12th and signed up 20 million in the US in 6 weeks.

In 2019 alone, Disney had 7 films that have grossed over $1 billion at the box office:

Frozen 2

Avengers Endgame

Captain Marvel


Toy Story 4

The Lion King

Star Wars Trilogy (and legacy)

In 2019 the market woke up to the multiple profit drivers and the power of the Disney brand. It also started to consider that actually creating a streaming proposition was easier for Disney than for Netflix to produce 7 blockbuster movies in a year.

The share price of Disney is now around $150, with further opportunity to prosper.


Firstly I must highlight the absolutely fantastic job Nicola and George have done this year. The bonus being both are extremely kind and honourable people and a pleasure to work with.

George has been prolific in ’19 and has researched and identified excellent investments to be added to portfolios at the next rebalance.

Nicola has continued adding a much needed dimension of intelligence, personality and rigour to client meetings and interaction. Where let’s be honest, the previous bloke was sadly lacking.

Looking forward to 2020, we think it is fair to say that the thing to be worried about is that we can’t see anything to be overly worried about. That sounds a bit crass, but actually it’s simply recognising that markets can be at their most vulnerable when not anticipating problems. Barring any unknown nasties surfacing, it could well be a pretty decent year globally with Emerging Markets and the UK looking to offer best value.

So finally, it just remains for us to say a big thank you for trusting us with your funds this last year. We take this responsibility with the utmost seriousness and will devote all our efforts in 2020 to producing the best outcomes for you.

Note: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.