REFLECTING ON THE PANDEMIC

The good, the bad, and the ugly

We have now passed the first anniversary of the 2020 market lows and the first Covid-19 lockdown which, coincidentally, happened on the same day. Let’s take a look back, one year on from the pandemic outbreak that shook the world.

The good

Let’s start with the good. Investors who stayed the course have made a lot of money in the last year. Let’s high-five that. Well done, and I’m glad investors across all spectrums have benefited. Whether you own property, have a KiwiSaver account, trade on Sharesies or are a fund manager – it’s been great. I think we’ve improved the level of interest in markets and, by default, improved financial literacy. All positive stuff.

But why did this happen? Twelve months ago in late March, we had just entered a full lockdown and global commerce ground to a halt. I spent my days working from home, queuing outside New World for essentials, and scootering in a bubble down the main road in Havelock North with the kids. As far as confinements go, I consider myself one of the lucky ones. Our UK-based investment team is still in lockdown. The idea of being confined to a studio apartment in central London is not appealing for someone like me who loves the outdoors.

The pandemic has provided all of us with a new perspective on life, whether you like it or not – everyone has been forced to evaluate priorities, and I think in many cases this led to positive change.

On a global macro scale, the acceleration in trends has seen faster adoption of electric cars, for example, and additional fiscal stimulus allocated to green infrastructure. Both of which will be better for society over the long-term.

We’ve also witnessed an acceleration in online shopping. Many of us have been buying over the internet for two decades. I bought my first book from Amazon in 1999 (on the Asian financial crisis if I remember correctly). But most retail transactions were still done in-store. Post-Covid, we are now comfortable buying everything from furniture to groceries online, and even doing things like yoga online. I regularly have a pilates session digitally. This has seen the rise of companies like HelloFresh, AfterPay, Wayfair, Etsy and Peloton, to name just a few. Pie managed to catch this trend early and has ridden it for the last year, which has resulted in some great investment opportunities and payoffs.

The bad

We call it cabin fever for a reason. There is nothing more frustrating than being stuck inside. It’s bad enough when it’s cold and wet, but when you’re forced indoors because it’s a crime to go out, or because you believe there will be a zombie apocalypse (don’t laugh, the thought probably crossed your mind), that’s no fun at all. Many don’t have ideal home situations either. Hence the steep rise in anxiety, depression and poverty in those countries affected the most by rising positive cases, continual lockdowns and job losses.

If you owned a travel business or even if you are in an industry that feeds off travel, such as a café in Queenstown, Covid-19 has hurt, badly. And while we all know travel will come back, the big question is when? At the risk of being political, I would like a bit more clarity on this from the government. A realistic timeline that we can hang our hat on, and to allow people to plan and prepare. From an investment perspective, if you were an investor in Air New Zealand or Tourism Holdings for example, despite the big rally off the lows, your investment is worth less today than it was at the start of 2020.

And the ugly

Buy high, sell low. While this should read the opposite, when investors panic, emotions take over and rational thinking goes out the window. Remember, we’d all love to be able to time the market perfectly, because we all have this innate belief as humans that we can predict things. The reality is that most of us are hopeless at it. It’s a little bit like driving: 8 out of 10 American drivers think they are above average, which we know is statistically impossible. I think investing is much the same. Next time you think that you can predict the market, ask yourself these questions: Do I have more knowledge than the collective? So what do I know that everyone else doesn’t already know? Then ask, logically, what will this look like in 12 to 18 months? Because the market is usually so short-term focused that if you can think beyond tomorrow, automatically you have an edge. With a caveat that on the flipside sometimes investors get so excited about something they start to dream – think Tesla – and prices get overvalued. But that’s not usually something to worry about during a market sell off!

We can fortunately say at Pie that through regular communication and the loyalty of our client base, very few investors withdrew their investment at the bottom.

March in focus

March was a mixed month for Pie, with a strong performance in our Global Growth Fund and Global UK and Europe Fund offset by weakness in Australasia. You’ve got to be diversified, as they say. We saw a mix of good and bad news through March, ranging from a container ship running aground in the Suez Canal in Egypt and causing delays, to new highs for the Dow Jones, then to the left-field property tax announcement from the Government.

As always, thank you for your support. If you have any questions please don’t hesitate to call me on
(09) 486 1701, or email me, mike@piefunds.co.nz.

Mike Taylor, Founder and CEO

Information is current as at 31 March 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.