Twice a year the ‘wealth management’ firm that looks after our modest savings usually invite their small clients to London for a talk on how it sees the markets and what position it is taking on various sectors. This is accompanied by a extravagant lunch and a choice of afternoon activities: tickets to a play or private tour of an historic building. It is meant to convey that all is well with our little world as long as we stay in their hands. This year such an occasion was clearly not possible so we were invited to a Zoom meeting.
I settled down, filled with apprehension, expecting to hear that our savings had plummeted and we were not in as good shape as we had hoped for our retirement. I listened in sheer astonishment at the smooth, assuring and assured presentation telling us all that we were doing rather well, actually. Really?
The quarterly news letters continued along similar lines. Take this extract: “The possibility of a second wave in America has shaken US markets, which have had an astonishing quarter. The S&P 500 gained significant traction between the end of March and the start of June, posting the greatest 50-day rally in the history of the index.1 The Federal Reserve has played a key role in boosting US markets, and the gradual recovery of cyclical stocks since May suggests that investors are adopting an increasingly ‘risk-on’ approach as lockdown measures are progressively eased. Oil has made a swift recovery over the quarter after the price of a barrel turned negative for a brief period in April: prices are currently their highest since early March.2
The contrast between markets and economies, however, is striking. Unemployment in the United States remains at a historical high, and the GDP of the world’s advanced economies is expected to tumble by over 6% this year, surpassing the fallout from the global financial crisis.3 Global output has been badly damaged; world trade fell by 12.1% in April, by far the largest drop ever recorded.4 While the optimism in global markets is encouraging, the risk of permanent scarring on the global economy should not be overlooked.” Really?
You can guess that wealth management institutions stick to the big companies – especially with people our age who have a low risk profile.
I asked for a private meeting with the person who manages our small portfolio in early March when it was clear there was stormy weather ahead. I was told by this very assured young man that our portfolios were very well placed for what was unfolding. I said that was some kind of minor miracle. The biggest collapse in economic fortunes for many, many decades – and we just happened to have the ideal portfolios! He stuck to his guns and sent me the latest quarterly report and the company news letters to back him up. And events so far have proved him right. I am under no illusion that this state of affairs will continue but in the meantime, the rich get richer and the poor get poorer. It was ever thus.
I can see no defense at all for not increasing taxes for the rich. It seems not just a practical necessity in these difficult times, but a moral imperative.