What Goes Up Can Still Be Down

Editor's Views: Why November's market rally can't disguise 2020's carnage, the future of shopping, and the Morningstar Investment Conference moves seamlessly online

Holly Black 20 November, 2020 | 10:33AM
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It’s a peculiar phenomenon that we can be on the brink of a double-dip recession while the stock market is soaring. It’s a case in point of how investing really has very little to do with the economy.

Hopes of a vaccine have injected a dose of optimism into some struggling UK stocks. We’ve seen a handful of share prices double in a matter of days. Usually such gains are the preserve of exciting start-up firms, but this time round we’ve seen surges at cinema chain Cineworld (CINE), pub group Mitchells & Butlers (MAB) and catering outfit SSP Group (SSPG).

If you’d have had a crystal ball at the start of November, you’d be doing very well indeed. Yet the big picture is not nearly so exciting for most investors. A quick glance at a share price chart highlights exactly why it’s so important to look beyond the headlines when you’re investing. These shares may have doubled this month, but they’re still nursing heavy losses year to date.

This is where one of my favourite maths rules comes into play. If the value of a stock falls 50%, from 100p to 50p for example, it has to deliver a 100% return just to get back to where it started.

Maybe the rally is a sign that we’re turning a corner and there are more gains to come, or maybe this is just the eye of the storm. Either way, it pays to remember the basic investment rules and not get sucked in by short term excitement. Market timing is best left to the professionals. And even shares in terminal decline can still have big rallies before sliding all the way down to 0p.

Buy Local

We talk a lot about how the coronavirus has changed people’s habits and possibly for good. Current talk about what’s going to happen at Christmas is the latest item on the agenda. Right now, of course, the big question is: will Boris force Santa to cancel the whole thing? But I’m thinking about my festive gift-buying.

My in-laws usually love a festive trawl around the shops to fill up the family’s stockings; they actually enjoy navigating the hoards of shoppers and the snaking queues to find that perfect gift. This year? They’ve decided to do it all online for the first time ever.

As a couple in their mid-60s, they are rightly nervous about the risk of catching Covid-19 and don’t want to put themselves at any unnecessary risk. And while they’re disappointed to break tradition, I think they’re quietly excited about trying something new. It’s a clear example of how the pandemic is really accelerating that shift online and possibly spelling the end of the UK high street.

But let’s not forget the other end of the spectrum. Me! I’ve been an avid internet shopper for years. Until now, the only way I could buy a decent gift for someone was online – it was either that or use some snatched minutes of a lunch break to find a present at the few shops nearest the office. Unfortunately, these are a Sainsbury’s Local and a Pret a Manger and not many people seem to rate those as the best gift-buying locations.

This year, I have made a promise to only buy local. I’ve started following lots of local artists, jewellery makers and the like on social media and their online stores, and I’ll be putting in a big click-and-collect order with the independent toy shop up the road. So while I'm not swearing off the internet, I'm going to do my best to make its global power work for my local community.

Morningstar Conference Goes Digital

This is the fourteenth year that Morningstar has hosted its annual investment conference and, like most things in 2020, this time it has taken rather a different shape. Like so many events in Covid-19 era, we’ve gone digital and our excellent line up of speakers and webinars have taken place online.

At the start of the year I had all manner of things booked: comedy tickets, theatre and, of course, work conferences. Many of these were cancelled or delayed, but others boldly adapted to the new era and moved online. At first I was sceptical. Surely, watching online just isn’t the same as being there? But actually, I’ve since found there are numerous benefits to the era of the online event – not least that the coffee at home is often better than what’s on offer in a conference room.

More importantly though, the content stays on demand after the event, so it’s no longer a “miss it and miss out” type affair. So, if you want to hear what Aberdeen Standard’s Devan Kaloo thinks about the outlook for China, why Janus Henderson’s Jenna Barnard rates bonds, or about the latest research from Boring Money about people’s views on ESG investing – you still can. Make sure you're registered and you can catch up here


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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk