Today I had been expecting to be evaluating the possible impact of restrictions being relaxed and the Government’s plan for how we begin to move back towards normality. Unfortunately, I am going to have to wait until next week to do that now.

I came across a lovely comment from someone that it seems from all the news that the current crisis can only be solved by hindsight and what a pity it was that the Government hadn’t thought to stockpile hindsight before it started. The more one watches, reads or listens to the news, the more it does indeed seem that hindsight is the key. In fact, with hindsight, the idea of announcing how the restrictions will be relaxed the day before a Bank Holiday weekend when the weather is expected to be good, does seem a little silly if you were then going to expect people to wait patiently until Monday say for new measures to be put into practice.

Hindsight is a wonderful thing however, as well as allowing one to see what one should have done, it can hold dangers. It is easy to look back at things that have gone well and congratulate oneself on having done things well without considering whether it is valid to do so; whether what went well was because it was planned for or because it was fortunate.

For example, we produce factsheets each month for the seven model portfolios on which we base each client’s individual portfolios, which we assume are rebalanced every six months and benchmark against the average for each investment sector in the same proportions as the portfolio. This gives us a neutral but totally relevant benchmark to assess how our portfolios in general are performing.

Looking at these at the end of April, the 12 month returns range from +3.94% for the lowest risk portfolio to -6.9% for the highest risk portfolio with almost everything in equities. All seven portfolios were ahead of the benchmark over 12 months and four out of seven ahead over six months, but all with lower volatility.

With hindsight therefore we could easily think “didn’t we do well despite the pandemic and the headlines of plummeting markets”. We could also think that we therefore don’t need to consider if things need to change the other side of the pandemic and that clients will have been able to sleep comfortably at night. Within these however there are a number of dangers.

Firstly, although there are things which we focus on with portfolios, such as cost, tax, diversification and avoiding the weird and wonderful, which will have had positive impacts over the last few months and contributed to us not having to tell clients they have lost loads of money, our portfolios were not designed with this pandemic in mind. They were designed to try and do things which we know are sensible but not necessarily for the sort of global crisis that we have seen. So we need to make sure we do not presume that they are crisis-proof because the next one may be totally different. We aim to work with reasonable assumptions but the world can sometimes be totally unreasonable.

We also need to be careful that we don’t allow hindsight to lull us into believing that, just because we’ve not been seeing the sort of drops which have been making news in equity markets, what has been making news has not been causing our clients concern. It can be all too easy to look back at a period when portfolios saw drops in value but drops that weren’t generally even in double figures and were gradually recovered and presume that this was what clients saw and that therefore they weren’t affected by what was making news. When the financial crisis hit the one person that I hadn’t expected to worry was the client who had recently moved entirely to cash as he was having to wind up his business; the one client who really worried about what was happening was that same client.

So, as we come out of lockdown we may see unusual things happening as we discover which businesses or sectors have weathered the storm well and which have sunk with all hands. What we need to remember is that the things we have done with the portfolios should help but are not designed for the total unknown and that however pleased we may be with how things are going, you may not be as comfortable about things. What I would encourage you to remember is that if there is anything which causes concern or which you are unsure about, we are here to talk to and there is never a bad reason to call on us.