How to invest IN THE ROARING TWENTIES
Pent-up demand could unleash next share boom
Reasons To Be Cheerful Part 3, that catchy hit by Ian Dury and The Blockheads, became a key theme song for the troubled early 1980s. now, experts are adopting its sentiments for the rest of this decade, predicting that we are set for a sequel to Roaring Twenties, despite the economic crisis of 2020.
The vaccine roll-out will put us in the mood to go out and have fun after months of seclusion. some of the celebrations – which could evoke the revelry that followed the First World War and the spanish flu epidemic – will be funded by the £100bn of extra savings made during lockdowns, parts 1 and 2.
That’s the theory. Could this new faster tempo of life add get-up-and-go to your portfolio? or could Brexit chaos ruin the fun, compounding the challenges that face the economy in 2021?
It is possible that you may mostly associate the 1920s with its catastrophic ending – the Wall street Crash of 1929. Yet the arguments in favour of the new optimism still deserve serious consideration. after all, you wouldn’t want to be too late to the party.
In the optimistic camp is andy Haldane, the positive-thinking Bank of england chief economist. He highlights the huge level of pent-up demand for entertainment and travel and points out that lessons learnt during the pandemic could speed economic revival. The investment made by businesses in technology during lockdown could finally improve our nation’s poor productivity, for example.
This reflects a wider feeling that the almost breathtaking innovation displayed in the faster-thanexpected arrival of the Covid-19 vaccines could be followed by a more resolute and successful search for solutions to other problems, like climate change. Rob Burgeman of Brewin Dolphin remarks: ‘We’ve seen mankind at its best. I’m optimistic.’ AnoTHeR
upbeat voice is sven Jari stehn, Goldman sachs’ chief european economist, who is forecasting 7pc UK GDP growth for 2021 and 6.2pc for 2022. some other banks have also joined the glass-half-full group, and even the office for Budget Responsibility is expecting a 5.5pc rise in GDP in 2021 and 6.6pc in 2022.
If you are finding their confidence infectious, shares that should do well from a return to old habits include Wetherspoons, the pub company whose price has fallen from 1678p to 1065p this year, and The Restaurant Group, the Wagamama owner, whose shares have more than halved.
DIY became a lockdown craze, in some cases for lack of anything better to do. But it may be replaced by GaMI (get a man in), which is good news for Howden Joinery, whose focus is the trade rather than the amateur. a stronger UK economy should also benefit shares that you may already hold like Lloyds, Close Brothers, which lends to smaller business – and housebuilders. simon McGarry of Canaccord Genuity likes Barratt, Bellway and Persimmon. The excitement surrounding the new York stock market debut of airbnb underlines the conviction that people everywhere long to get out and about again. some UK shares have already risen on this belief, but they could have further to go. Ryanair is taking a gamble on the renewed desire for european trips by adding to its fleet. shares in concert promoter Live nation ( pictured – which owns Ticketmaster, are also staging a comeback on the basis that stadium shows will once more be unmissable events. The Gym Group is expanding, presumably to cater for those waistlines widened in lockdown. The company may be targeting buildings left empty by failed retailers. It is difficult to be optimistic about this sector, even if spending surges. But the pandemic may have caused some creative destruction, and stores that contrive to thrive will need premises.
Dzmitry Lipski, head of fund research at Interactive Investor, says this should boost the BMo Commercial Property trust which holds premium retail sites. Investing in this trust will certainly require optimism – it stands at a 30pc discount – but it has a yield of 3.5pc.
If your optimism is more tempered, you may prefer to take a bet on an improvement in the fortunes of smaller UK companies. Kamal Warraich at Canaccord Genuity suggests the Blackrock smaller Companies trust and the slater Growth fund. For exposure to the FTse 250, which is more domestically-focused than the FTse 100, you could opt for eTFs (exchange traded funds) like Vanguard FTse 250 or the ishares FTse 250.
People who have become more concerned about the environment during lockdown may prefer a UK fund with an esG bias. Lipski’s pick is Liontrust UK ethical.
During the Wall street crash, the Dow Jones tumbled by 50pc, in a decline that, close to a century later, still seems to exemplify the risks of investing in shares. But recent history is more consoling. The average UK fund has fallen by just 7pc this year, according to aJ Bell, even amid the pandemic’s ravages. Just imagine what some optimism could do.