Investment – Page 2 – H.J.Scott & Co

05/01/202506/01/2025

2024 Performance Review

A Happy New Year to all of our clients. We hope 2025 brings you all that you wish for. Here’s how each of our managed portfolios performed against our industry benchmarks over the last 12 months. I’m happy to say we beat all of our industry benchmarks once again.

H.J.Scott & Co. Cautious Portfolio versus Benchmarks

Portfolio	12 month Performance
H.J.Scott & Co Cautious Portfolio	7.98%
ARC Sterling Cautious PCI TR	4.37%
IA Sector Mixed Investment 20-60% Shares	7.81%

“Very few clients are invested in our Cautious Portfolio. Trying to remain cautious in such a challenging investment environment, whilst giving a meaningful return over simply holding cash, remains a difficult proposition. I’m pleased to say we have beaten both our industry benchmarks (only just) and a cash only return too.”

H.J.Scott & Co. Moderate Portfolio versus Benchmarks

08/09/202405/01/2025

Long and Variable Lags

Milton Friedman, the conservative University of Chicago economist and Nobel Prize winner, started talking about long and variable lags in the late 1950s. He described that the process central banks follow to aid or retard economic activity by adjusting interest rates up or down is fraught with timing issues. When interest rates rise, they will eventually show their effect, but very little change occurs immediately.

Think of economic activity as a fully laden oil tanker, when the brakes are applied it takes miles and miles before the slow down to a standstill finally occurs. The knack therefore is not to brake too late or the tanker will run aground.

There is an emerging fear that central banks should have applied the brakes months ago.

We have watched valuations of our portfolios ebb and flow over summer in typical fashion. Veteran investors have experience of lower return summer months and higher return winter months. But suddenly September is back to haunt us once more as the month of the year which typically gives the lowest returns. This year it’s negative returns so far, taking our valuations down to the lowest point since April.

The US Federal Reserve has maintained the confidence of market participants so far as a delivery of a “Soft Landing” seemed to be achievable. In turn this soft landing was anticipated here in the UK and across Europe. Last October in “Have Interest Rates Peaked?” I said;

The real indicator for central banks is the level of unemployment. So far the rises have been low, but at some point the trickle picks up speed and then it positively floods higher if central banks send rates too high and put companies out of business. The level of un-employment itself is a lagging indicator. The numbers aren’t reported until it is too late and those individuals are placed on “the dole” or whatever it is called today.

17/07/202405/01/2025

The First 6 months of 2024

At the halfway point of the year

Well 6 months have flown by, and so far the returns generated in the portfolio reflect a “normal” investment year. If there is such a thing these days? The first quarter is usually strong, followed by a quarter of catch-up, which is reflected in the returns generated by our main portfolios so far this year. All portfolios remain on target to achieve their annual targets at this point.

What’s a “normal” year?

Veterans of our investment management service know that we generate the bulk of our returns in the 1st and 4th quarters of the year, with the 2nd and 3rd quarter usually only generating less than 25% of the years returns in total.

July to October should drift along nicely with little to show by way of returns, but hopefully without major wealth threatening dramas either. That said, July started with political meltdowns in France which potentially jeopardise the future of the EU as a trading block and of course the attempted assassination of a US President in waiting and the realisation that the current POTUS probably hasn’t been calling the shots for years. Political drama enough already!

Did we navigate the UK General Election in OK shape?

On the whole yes, but as always we could have done better in hindsight. We positioned for the likely result, which wasn’t exactly hard given every man and his dog also guessed the likely colour change in parliament. There was no shock in the markets as was expected by the UK shock index I referred to in my previous blog.

We expected a drop in Big Oils – Shell & BP (Labour’s Net Zero promises) and utilities UU, South West Water, Centrica etc. (The threat of nationalisation) – we have not held any of these shares for some time. However we did not position ourselves as heavily in social house builders eg. Vistry in particular and the others Barretts etc. as the FTSE 100 index does, which was perhaps a missed opportunity.

Category: Investment