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TACIT THOUGHT – Weekly Insights and Views

The hope that the Pandemic would be behind us by this time was in hindsight a wish that would not be granted. The reality of Pandemics is that they either burn themselves out very quickly or that they linger and society must adjust to accommodate them. Our central view has been that the latter would prevail in this instance and that societies and economies would feel the impact of Covid-19 for many years to come. This, just as the Financial Crisis of 2008, would leave lasting scars on the economic growth of economies and become the new ‘normal’. This is not a nice thing to state, but as investors, it is a reality we must understand.

Investment returns in 2021 have been positive in absolute and ‘real’ terms after adjusting for higher inflation. Future returns will be driven by investing in companies that understand the new environment and adjust to it best, either by controlling their costs or by taking advantage of a competitor not adjusting quickly enough. Growing cashflows drive longer term equity price appreciation not the other way around. In our view, investors must become even more selective in 2022 as economic growth moderates following a sharp uptick this year.

As in previous years, the Tacit Directors have made a charitable donation in lieu of sending Christmas cards. This year we have chosen Restart, a small London based charity whose objective is to support homeless people to overcome the challenges of life ‘on the streets’. You can learn more about their mission and approach at www.restartlives.org.

We wish you all a safe and peaceful holiday season.

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