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H1 2020 – six months that shook the world

Technical article

Publication date:

30 July 2020

Last updated:

30 July 2020


Ben Kumar, 7IM

Clients are often keen to find out how we invest and what drives our decision-making. Let’s demonstrate with a practical example. This year has been an especially interesting case study in how we look at markets and what we regard as important in the long run.

The background is that we believe in diversification. We aim to provide portfolios with broad exposure to the major markets across the world. These long-term allocations drive most of our returns.

We also aim to add value, though, via our Tactical Asset Allocation (TAA), taking advantage of interesting investment opportunities as they arise. In the last few months we have been fairly active in most portfolios, which has added to returns.

I’ve pieced together the picture of the last six months as they unfolded, looking back at our commentaries at the time, records of the meetings we had, and the positions we took, as well as picking some headlines from the papers in each month. 


At the start of 2020, climate change was at the top of the agenda. Front pages of newspapers were dominated by kangaroos and koalas backlit by flames. Late in the month came the Wuhan lockdown, but the disease seemed to come under control quickly.

The 7IM portfolios had no particular tilt towards defensive or growth assets heading into the year, and we made no major portfolio changes during the month. 


Early February in the UK was Storm Ciara, and the accompanying gales, floods and property damage. Boris Johnson reshuffled his cabinet, replacing Sajid Javid as Chancellor with the relatively unknown Rishi Sunak. Donald Trump was impeached, but acquitted by the Senate.

By Valentine’s Day, it was becoming clear that the coronavirus was not just a Chinese problem. On 26 February, every newspaper in the UK had coronavirus on its front page. The FTSE 100 lost 7% over the next three days.

At the end of February, we thought that “the economic impact of coronavirus will be short-lived and contained.” Boy, were we wrong!


Early in March it suddenly became clear that COVID-19 was pretty damn serious. On 9 March, Italy quarantined one quarter of its population. Other European countries began to prepare similar measures. Global equity markets moved around violently, seeing 5% swings in the course of a day.

Our portfolios performed strongly in the initial sell-off. Our structurally diversified asset allocation delivered as expected, and we made a few further defensive tweaks – trimming our credit exposure and adding a little to government bonds. We postponed rebalancing portfolios for a few days, which added a little to the month’s returns.  

By mid-March, policy responses were beginning in earnest. On 18 March, The Scotsman led with “Chancellor’s £350 billion rescue package to save UK economy.” There have been few tougher first months in history than Mr Sunak’s. By 23 March the UK was in lockdown and our Investment Management Team was getting used to daily phone calls and videoconferences.

Late in the month we began taking profits on defensive positions and rotated into some of the opportunities we saw. We sold some of our defensive alternatives, looking instead for strategies to catch the rebound. We also began buying European dividends and high yield bonds.


“Johnson in intensive care” was the story of early April. It’s hard to tackle a pandemic without a leader. Financial conditions started to stabilise, though, as the large-scale job protection programmes calmed nervous investors’ fears of an unemployment catastrophe. We continued to rotate from government bonds into corporate bonds to take advantage of the higher yields on offer.

On 21 April, for the first time in history, the price of some oil futures contracts turned negative. You would have been paid to haul oil away in a tanker. We have no strategic allocation to commodities in our portfolios, so this had no direct impact on us. Most equity markets rallied strongly during the month, and at the end of April we trimmed equities slightly – by around 2% in a Balanced portfolio.


With lockdown in full effect, May was quieter as people across the world settled into their daily rhythms and routines. Headlines in the UK were largely around deconstructing the previous day’s political and scientific briefing. We did a piece on May 7 titled ‘Holding Pattern’, which summed the month up.

The world began to come to terms with life after lockdown – with some countries further ahead than others in their experience with COVID-19. China and South Korea showed they were willing to re-impose lockdowns on certain regions if needed, whilst also getting a large chunk of their population back to work and school.

Late in May, we added a position in Asian high yield bonds, which looked more attractive than their US equivalents, partly given the differences between the responses to COVID-19.


The easing of lockdown continued in June. In England, non-essential shops began to open on 14 June, while in Scotland it took until the end of the month. Queues on the pavements on the first day of easing led to predictions of a sharp economic recovery.

But we’re more cautious. While household bank accounts have swelled by around £55 billion between March and May – money that needs to find its way back into circulation to avoid an extended recession. Many people are fearful about the future so spending will probably return in a trickle, not a flood.

March was a busy month for TAA, with portfolios changes seven times in a Balanced profile, reflecting wild markets and the opportunities that were arising. By contrast, there were no TAA changes in February and only two changes in May.

It’s now July and the 7IM portfolios are positioned for an erratic and uneven global recovery over the next six months.

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.


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