COVID-19A weekly response: 1 May 2020

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Contents

4 Investment update

10 For each other

12 Literature: an escape from reality

14 Our commitment

A message of reassuranceWe would like to reassure you that, as part of the LGT Group, we are well protected in the event of negative economic developments. LGT Bank’s liquidity is well above the legally required minimum liquidity ratios, due to the bank’s solid refinancing and asset base. With a core capital ratio (Tier 1) of 19.9%, LGT is very well capitalised and has high liquidity. LGT Bank Ltd. is one of the few private banks that has had its creditworthiness checked regularly for many years by both Moody’s and Standard & Poor’s, consistently achieving very high ratings (Moody’s: Aa2 ; Standard & Poors: A+). The creditworthiness of LGT Bank’s parent company, LGT Group Foundation, is an important factor for the rating. The first-class credit ratings are attributable to LGT’s strong balance sheet, conservative lending strategy and earnings power, the latter based on over CHF 200bn of Assets under Management, as at March 2020.

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A weekly overview

The investment landscape

The tragic loss of life to the COVID-19 coronavirus continues,

with deaths in the US now exceeding those caused during

the Vietnam War. In the UK, the number jumped with the

inclusion of deaths in care homes rather than just hospitals.

However, the lockdown appears to be working as we see a

falling infection rate.

They have taken heart from reports of progress on

treatment and a possible vaccine, resulting in the S&P 500

having its best month in over thirty years, despite falling on

the last day of the month.

Medical update

Last week, there were reports that an incomplete trial of

a new drug, Remdesivir, in China had shown little benefit.

This week, however, Gilead released the results of a much

bigger trial which appeared to show that Remdesivir could

speed recovery in severely ill COVID-19 patients. US Food

and Drug commissioner, Steven Hahn, said they would move

at “lightning speed” to review the data for possible approval

of its use on a wider scale.

“Financial markets continue to balance poor

results and dire economic numbers with

the extraordinary level of support from

central banks and governments around

the world.”

Jonathan Marriott, LGT Vestra Chief Investment Officer

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President Trump announced “Operation Warp Speed”

to combine resources to develop a vaccine with the

government accepting the cost of any failures. There are

signs of progress, but Remdesivir is a treatment that eases

symptoms and is not a cure.

In the UK, there were reports that a lab in Oxford is ready

to test a vaccine. A vaccine will take many months to trial

and get into production, suggesting that lockdown, in some

form, will have to remain in place for many months to come.

Tracking people and extensive testing may enable some

restrictions to ease, but working practices will have to adapt

to social distancing until a vaccine is available.

Economic action

The economic numbers continue to be gloomy. In the US,

the weekly Initial Jobless Claims indicate that over 30 million

people have lost their jobs in the last six weeks. This is close

to 20% of the US workforce.

Most economic data reported so far does not reflect the

full shutdown and the flow of extremely weak data will

continue for some time. Clearly, this is to be expected, and

markets will be looking at the path out of lockdown for

direction rather than reports of how deep the recession is.

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Monetary and fiscal response

This week we have seen regular meetings from the Federal

Reserve (Fed) and the European Central Bank (ECB). With so

many measures already in place, these meetings made small

changes compared with the drastic announcements we have

seen in previous weeks. Unsurprisingly, the Fed announced

that rates would remain low until they were confident

that the US employment numbers are closer to pre-crisis

levels. The ECB has reduced the rate on one of its support

programmes to encourage more bank lending. Markets

were slightly disappointed that the ECB did not expand its

bond purchase programme further.

Market update

It has been results season for the first quarter. The Q1

results only see part of the impact of coronavirus, hence it

is trading statements and expectations that have been of

more interest.

Overall, many companies are abandoning predictions about

future results, saying the impact is just too unpredictable.

Companies that sell items that people need or have to

spend money on have done well so far. Whereas those

dependent on discretionary spending or capital investment

are suffering. The trend to online shopping accelerated

resulting in non-food high street retailers being hit hard.

While some turnover may go back to the high street, it

is a long-term trend and is unlikely to be fully reversed.

Dividends continue to be cut to preserve balance sheets,

with Shell, following the decline in the oil price, cutting its

dividend for the first time since the Second World War.

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“Shell was a major contributor to the

dividend payments for the FTSE 100

index and we expect dividends to

be less than 50% of what they were

pre-coronavirus for the index as a

whole.”

Jonathan Marriott, LGT Vestra Chief Investment Officer

This will still leave the yield higher than many other

developed markets and attractive relative to Gilt yields,

which are just 0.23% for ten years.

Dispersion within equity markets remains high in the sell-off,

growth style outperformed value and this continues to be

the case. In the US, the Russell 1000 Value Index is down

18% whereas the growth equivalent is down just 1%. We

expect this trend to continue.

With government bond yields low and support from central

banks buying, corporate bonds have been well supported

and we continue to favour this area for those looking to add

risk in portfolios.

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Conclusion

Equity markets continue to balance the impact of declining

economic activity and actions taken to support markets and

the wider economy. Equity markets, having risen sharply

during April, have seen some weakness towards the end of

the week.

We expect markets to remain volatile in the weeks to come

with a very wide dispersion of returns both on a sector basis

and at individual company level. Quality growth equities

have outperformed and we believe that strong companies

will continue to outperform. Thus a selective approach to

both equity and credit markets is appropriate.

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“ Many companies are abandoning predictions about future results, saying the impact is just too unpredictable.”

Jonathan Marriott, LGT Vestra Chief Investment Officer

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Showing our resilience, our kindness and

our strength for each other

For each other

We are all adapting to a major change in our daily life. With

many now in isolation, it can be challenging to support

friends, family members and colleagues, amongst others.

Over the past few weeks, we have found ourselves thankful

for many things. For the NHS, for the community spirit we’re

seeing in towns up and down the country, thankful for our

family and friends, thankful to our colleagues on daily calls

and video chats to keep the camaraderie alive.

We are also thankful for this time to take stock and

appreciate the little things, as it is these that will get us

through these troubled times together. Thankful for a daily

dose of sunshine. More time for home-cooking. More time

with our families. We are thankful to you, our client, for

placing your trust in us. We are thankful for all of these

things and more. What are you thankful for?

We have launched ‘For each other’ where we share

each other’s stories of thankfulness as we aim to

foster a virtual community and reinforce the message

that we are here for each other. We’re asking you

to share with us moments that you are thankful

for. Please send these through to your

LGT Vestra contact or thoughts@lgtvestra.com.

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An insight into what you, our clients, are thankful for this week

I am delighted I havetime to read some

of the innumerable bookssitting on my shelves.

Four sitting on my deskpresently include:

The Fellowship insteadasked for my piece to

be put on their website.I now send it to you toshare with your clients:

www.dickensfellowship.org/content/unriddling-edwin-

drood-writing-second-part-%E2%80%93-

sir-david-madden-kcmg

In 2011, I wrote the secondhalf of Charles Dickens'

unfinished novelThe Mystery of Edwin Drood

and had it published(not the only person to

attempt this by any means).The Dickens Fellowship

asked me to speak aboutDrood at a conference on

17 July, now cancelledbecause of the pandemic.

The Dawn of Eurasiaby Bruno Macaes

The Language of Citiesby Deyan Sudjic

Utopia for Realistsby Rutger Bregman

Mr Five Per Cent:The Many Lives of

Calouste Gulbenkianby Jonathan Conlin

12

Literature: an escape from reality

“To read more” is frequently at the top of New Year’s

resolution lists, something we scold ourselves for not doing

more of when we are commuting or before we go to bed.

Too often, it is a resolution that mainly experiences success on

holiday, by the beach or on the plane.

All that, however, seems to have changed. Since the

beginning of lockdown, one in three are now reportedly

seeking comfort from the pages of a book.1 Not just any

books: fiction – classics and crime novels specifically. So it is

escapism that we crave.

There are other reasons too. Screen-time is higher than

ever. Many of us are working from home; we are socialising

virtually; we are consuming newsfeeds on phones and

tablets; we are even exercising via online platforms. Reading

is a break from all of that. And with more time on our hands,

whether it is due to working more flexibly or weekends with

less social commitments, reading is a welcome distraction.

So whether it’s a break from your screen or a break from

reality that you seek, our investment managers have shared

some books they have read during lockdown to help inspire

you.

1 The Reading Agency

Being thankful for the written word

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Mythos: The Greek Myths Retold by Stephen Fry - Paul Nixon, CEO LGT Vestra US Having always enjoyed ancient history, it is a guilty pleasure to have these classic (and sometimes very dry) stories brought to life again through Stephen Fry’s down to earth humour and modern story-telling.

Win Bigly by Scott Adams - Charles Sanford, Partner and Wealth MangerA fascinating journey into the mind and method of President Trump. Like him or loathe him, in being elected President, Trump achieved what many predicted he wouldn’t. The book explains his ascent to power, at least as much down to judgement as luck, at the same time giving a great insight into the psychology of persuasion.

The Hunger Games by Suzanne Collins - Lydia Brook, Assistant Wealth Manager I loved the trilogy when I first read them, and have been meaning to re-read them for a while. Lockdown has freed up time for me to dip back into them. Great story and great characters.

84 Charing Cross Road by Helene Hanff - David Lane, Partner and Technical Director This book demonstrates how books can bring people together even when they live thousands of miles apart.

Shantaram by Gregory David Roberts - Natasa Williams, Partner and Head of Private OfficeA story of human resilience, love and wisdom depicting extraordinary acts of kindness set in the midst of extreme poverty in India. Reading Shantaram took me to another world,a book to be read slowly, as many pages are so wonderful they need an immediate re-read.

The Ginger Tree by Oswald Wynd - Jenny Tozer, Partner and Investment ManagerIt is the true story of a Scottish lady who left the UK in 1903 to marry a British Military attaché based in Peking. The narrative reveals the enormous changes in both China and Japan over the ensuing 60 years. It tells the story of gradual cultural assimilation over a lifetime of learning.

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Our commitment

In order to tackle the negative effects of the coronavirus

pandemic, we have committed to supporting The Rapid Action

by The Fore and Trust (RAFT) emergency fund.

RAFT’s purpose is to enable organisations, working with

pressing social issues, to remain operational and continue

their vital work reaching people who need help the most.

We hope to raise £100 000 to support their efforts,

kick-starting this with a £25 000 donation. Having reached

an initial £1 million, RAFT temporarily opened up funding

applications to new charities. Within 48 hours, they received

500 applications, demonstrating the crucial need for

funding now.

Thank you to each of you who have already joined us in our

efforts to support RAFT’s work.

For more information, please visit:

www.thefore.org/covid-19-response-raft/.

Charity in focus - The African Gifted Foundation ■ A science and mathematics academy for exceptionally gifted

disadvantaged girls from across Africa. When the crisis began, all of the students were sent home - into households where they often have no internet connection and additional caring duties.

■ The organisation is seeking funding to provide tuition to these students using new methods, so they can earn much-needed qualifications to help them find a way out of poverty.

■ With RAFT’s support, The African Gifted Foundation is able to keep on the necessary teaching staff and purchase equipment to keep on teaching.

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Donate via The Fore website: ■ www.thefore.org/raft-donation-form/

How the RAFT fund works

Financialdonation

Pro bonodonation

TheRapid Actionby The Foreand Trusts

(RAFT)

Providing support to hundreds of small charitiesand social enterprises

LGT Vestra LLP14 Cornhill, London, EC3V 3NRPhone +44 (0)20 3207 8000, info@lgtvestra.com

www.lgtvestra.com

VALUES WORTH SHARING

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