Today we talk about two current themes

Today we discuss the growth in markets lead by technology sector despite the daily negative news and move to sustainable investing practices.

Transcript:

Arch Capital Update – Friday August 7th 2020

Today we talk about two current themes

 Welcome to today’s Arch Capital update, we hope you all are keeping well.

As we wake up every day there is always more bad news about what is going on in the world. Between the virus and explosions going off in Beirut, you would expect stock markets to be tumbling. They should be down maybe 70 or 60 percent by now but instead what’s happened since March is that they have actually recovered significantly. Some markets are actually higher than they were before the coronavirus. This might sound strange.

Below is the chart for the NASDAQ 100. This is the market index that consists of the top 100 technology firms in the United States and includes companies such as Apple, Microsoft, Amazon, Google and Facebook. So what is happening with these companies?

From low point in March, the NASDAQ 100 has reached unprecedented highs during this pandemic and these companies are more profitable than ever. These large tech companies are driving their earnings and driving markets with them. Due to our exposure to these stocks, we are similarly feeling this drive through our portfolios.

Another current theme is sustainability. We are starting to see a trend towards sustainability that has been growing over the past couple of years. One of our main funds that provides exposure to the US is a sustainability trust. Dimensional produce a really interesting sustainability report that runs through the impact that these funds are having on greenhouse gases and other corporate governance issues.

As boards are increasingly having to make decisions to do the right thing, not just about the environment but also about how they behave, this sustainability theme is proving to have growing presence in investing. The book “Tipping Point” by Malcolm Gladwell reflects on this theme. We are going to see some things change in the world and we are going to see a tipping point where the majority of funds will adopt this sustainable behaviour.

Similarly, there is also a tipping point towards this shift from traditional style companies into a more new age style company. These companies are now responding to this pandemic and to how workplaces will change if not for ever, but for perhaps quite a long time.

In summary, the two key themes are growth in the market and sustainable investment. Given what’s going on in the world, this drive in the markets may seem strange but Clients are exposed to these big companies in their portfolios and are benefiting from this drive.

As always, please reach out if you would like a copy of these reports or need any more information.

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