SPRING
2020 TURBO CHARGE YOUR INVESTMENT WITH THE POWER OF COMPOUNDING WORLD ECONOMIC & MARKET OUTLOOK Graham O’Neill
10 TIPS ON HOW TO GROW YOUR SME KEEPING PACE WITH A CHANGING WORK CULTURE 10 HABITS OF CONSISTENTLY HAPPY PEOPLE MEET THE TEAM
TABLE OF CONTENTS 3
Turbo Charge Your Investment With The Power of Compounding
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World Economic & Market Outlook - Graham O’Neill
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10 tips on how to grow your SME
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10 Habits of consistently happy people
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Keeping Pace with a changing work culture
19
Meet the team
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Range of services
Welcome to the Spring 2020 newsletter.
As always this issue contains a variety of articles which we hope will be of interest to you and your business. If you have any queries please do not hesitate to contact us and one of our highly experienced team will be happy to assist you.
Dervilla and Sarah.
TURBO-CHARGE YOUR INVESTMENT WITH THE POWER OF COMPOUNDING With time and patience, compounding can give your saving or investment efforts a massive boost. Find out more about this little-known financial marvel... When it comes to saving and investing, the key to making serious money is to start as early as you can. Why? Because the sooner you begin, the more time your money has to benefit from a phenomenon known as ‘compounding’ – reportedly once called ‘the Eighth Wonder of the World’ by a certain Mr A. Einstein.
HOW COMPOUNDING WORKS Often known as ‘compound interest’ or ‘compound returns’, depending on whether you’re saving or investing, compounding works a lot like a snowball rolling down a mountain. While we may start off with a small, fist-sized ball, we can end up with something much bigger as it gradually gains momentum.
START NOW TO MAKE THE MOST OF COMPOUNDING Whether you’re saving or investing, the phenomenon of compounding can really help your money grow. As we’ve seen above, however, you need to give it plenty of time to allow it work its magic – so if you can, it pays to start sooner rather than later. As the saying goes, the early bird catches the worm. Or in this case, the returns.
HERE’S HOW THE CONCEPT WORKS IN PRACTICE... • Let’s say you put some money into a bank savings account. • After a year, you’ll have earned interest on that original sum. • In the second year you earn interest on both your original capital plus the first year’s interest. • Then in the third year, you earn interest on your original capital plus the first two years’ interest. • And so it goes on, like a snowball gathering size and speed. The same thing applies if you’re investing – the difference being that instead of earning interest on your interest, you can potentially earn returns on top of any returns you’ve already earned. Just remember to bear in mind that the value of investments can go down as well as up, and you may get back less than you originally invested. So rather than rolling down the mountain in a straight line, our snowball may have a bumpier ride.
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€27 602 €30 474 €33 646 €37 148
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€55 204 €60 949 €67 293 €74 297
€60 832 €74 012 90 047 €109 556
€66 911 €89 542 €119 827 €160 356
Year 5 Year 10 Year 15 Year 20
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€100 366 €134 313 €179 741 €240 535
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€165 612 €182 849 €201 880 €222 892
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€200 733 €268 627 €359 483 €481 070
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€220 816 €243 798 €269 173 €297 189
€243 330 €296 048 €360 188 €438 224
€267 645 €358 169 €479 311 €641 427
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These figures are estimates only. They are not a reliable guide to the future performance of this investment.
If you invest in this product you may lose some or all of the money you invest.
The above example is hypothetical and does not represent any investors particular experience. The above example excludes the impact of tax.
These products may be affected by changes in currency exchange rates.
Returns are less 1% annual management charge.
The value of your investment may go down as well as up. Warning:
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January
2020
WORLD ECONOMIC & MARKET OUTLOOK Graham O’Neill - DIRECTOR AT INDEPENDENT RESEARCH CONSULTANCY LIMITED
INTRODUCTION
In a complex world dominated by short-term news flow and “noise” in today’s information age investors can easily be overcome with news and commentary, some of which can be ill informed and much over complicated. We have always believed the merits of simplicity are under rated and asset markets are actually driven by just three factors – fundamentals (economic and political/geopolitical), valuation and sentiment. Market Outlooks have always used this simple but robust framework and this will be used to assess the outlook for equities globally in 2020. 4
Fundamentals Starting first with fundamentals, and looking at the economic background, the two biggest fundamental risks that always herald equity market weakness are recession and rising inflation. The former negatively impacts profits and the latter results in higher interest rates and a higher discount rate being applied to future earnings. Neither looks likely in 2020. We have discussed before the powerful secular disinflationary forces which referred to as the 3D world comprised of debt, demographics and devices driving technological change. These have both supply and demand side implications for economies, meaning structurally lower levels of both economic growth and inflation. Investors today are living in a low growth and low interest rate world. The environment today of full employment, but muted inflationary pressures including wage growth, has blunted the cyclical impulse of monetary policy and resulted in muted macro economic volatility. The global economy has for a number of years been in the not too hot, neither too cold camp, which has allowed the persistence of low interest rates and unconventional monetary policies. Looking at both market implied expectations and forward guidance from the major central banks, this low rate world will persist for the foreseeable future.
Fulcrum’s suite of econometric models providing future guidance on economic scenarios has commented that since mid 2019 global manufacturing has started to recover with overall business conditions stabilising. The Fulcrum Nowcast models at the end of the year showed annual global growth hovering at about 3-3.5% which whilst around half a percentage point below trend, does not point to an imminent recession. Whilst China has always been a cause for concern, the growth rate there has remained above 6% and remains one of the positives not just in Asia, but globally. Work by Fulcrum suggests growth rates will return towards trend levels in 2020 in contrast to 2019 when weakening global economic activity has dominated news flow. All the major advanced economies have had a further extension of low inflation with the inflation swaps market dropping almost 50bp since late 2018. The evidence suggests that the Phillips Curve relationship between declining unemployment and rising price inflation no longer works in advanced economies, partly because central bank inflation targets carry strong investor credibility. Thus, the likelihood is that unemployment can fall further without causing any immediate rise in reported inflation. In a world where few companies possess true pricing power, even modest increases in wage inflation could put some corporate margins under pressure, although this is likely to be limited to certain sectors, rather than an economy wide trend in any country or region.
There are now some signs that governments have recognised monetary policy may be losing its effectiveness and as a result are prepared to loosen fiscal purse strings, or in other words, some end to the policies of austerity that have been in place post the GFC. Already this year Japan has launched a major fiscal package, whilst the newly elected UK government appears intent on going on a “spend up� which would benefit regions outside of London and the south east, even if the actual economic case for this is not strong. China has allowed local governments to fast track bond issuance to help fund infrastructure as it continues to pursue a policy of urbanisation. Estimates suggest that over the next decade a further 200m people will relocate from the countryside to satellite towns where the build out of infrastructure can be justified economically. Even in Germany the Bundesbank has questioned the commitment to maintaining a budget surplus. The Trump administration has also talked of further tax cuts to be revealed later this year- perhaps unsurprisingly in the year President Trump is seeking re-election.
Further reducing the risk of weaker global activity is the Trade War truce between China and the US, as reflected in the Phase 1 deal. While tensions between the established and the aspiring superpowers will remain, for different reasons the near term political and economic interests of both Trump and Xi seem best served by de-escalating the Trade War threat. For Trump a number of the rust belt states have actually seen a contraction in economic activity due to their exposure to manufacturing and these key battle ground states in the forthcoming Presidential election are important for Trump to win, hence the likely desire on his part to de-escalate trade tensions in the short term. For the Chinese buying time whilst the economy rebalances away from fixed asset driven growth also has attractions. Whilst it is possible that trade disputes could surface elsewhere, with Europe potentially being a target, this is more likely to be noise rather than anything substantive unless Trump decides pursuing these are electorally advantageous.
When stimulatory fiscal policy is added to accommodative monetary policy, together with signs such as strengthening PMI Indices it appears that the global economy is reversing its 2019 weakness. The bottom line is that barring an exogenous shock recession is not a 2020 issue.
GE A IM
Despite the strong rise in employment globally, inflation continues to be below central bank targets and there is no compelling evidence that consumer prices are about to rise quickly. Central banks are more concerned that inflation remains too low with concerns about the Philips Curve no longer working. As a result, central banks are likely to view any pickup in economic activity as beneficial, rather than a reason for precautionary tightening. Comments in the US by the Federal Reserve has talked about a symmetrical approach in respect of the 2% inflation target and Fed Chairperson Powell has commented that employment can fall further without creating inflationary pressures. As a result in the US loose monetary policy can persist for a while and the Fed may even be relaxed about an overshoot in the short term of the inflation target, compensating for the undershoot that has occurred.
E R E H E B D L U O H S 5
Exogenous Risks Markets will remain highly sensitive to economic developments, both in terms of growth remaining above recessionary levels, but not accelerating to such a degree that the benign outlook for interest rates is threatened. The US economy is likely to continue to be scrutinised with investors looking to see wage growth does not accelerate to a level that threatens the low inflation outlook. However, in December, US wage growth dropped below 3% for the first time since July 2018, despite unemployment remaining at a 50 year low of 3.5%. Bond markets at current levels will be highly sensitive to any signs of an uptick in inflation, but even if wages and bond yields rise modestly in 2020 this is unlikely to be of an extent that would worry or impact equities this year.
GE A IM
For 2020 the biggest risk to equities are exogenous ones residing in the political/geopolitical arena, namely the US Presidential Election and the Middle East and most recently the coronavirus. Adverse outcomes in these could lead to severe market declines within the case of the former the potential for a long drawn out bear market, or in the case of the latter two a short sharp setback. As regards the US election, it is not just the result, but also the path to that outcome which matters. If a left leaning candidate (Sanders or Warren) seems likely to win the Democratic nomination, and Trump’s popularity ratings decline to put his second term in doubt, markets will react negatively well ahead of November. Thus, the Democratic primaries will be an important item of news to watch, and whether a more centrist candidate such as Biden or Bloomberg seems likely to prevail. This latter outcome would be less likely to unnerve equity investors although markets would react negatively to a loss of the Presidency for the Republican Party. In terms of the Middle East, the assassination of Soleimani, the Iranian military chief, and one of the most influential figures in the region, is a significant event as an unwritten rule had been that a country’s leaders were not targeted by military attacks. Whilst there has been a muted initial response from the Iranian regime it is unlikely to be the last one. Further retaliatory action could take a number of forms against not just the US, but also close allies in the region with Britain clearly being a target. Iran may look to take action which will harm Trump’s re-election bid. In 2016 Trump pledged to pull away from Middle East involvement and Iranian provocation may look to test this pledge. Disruption of oil supplies through the Straits of Hormuz would be a concern for markets. Religious hardliners in Iran are now facing increasing levels of internal descent with US sanctions biting and discontent over levels of corruption in the country. The regime in Iran may take the view that the best way to regain internal support from the population is to take action against the perceived external enemy.
E R E H E B D UL O SH
Saudi Arabia could also be a source of tension in the region with the recent allegations of the hacking of Amazon chief’s Bezos phone by the Saudi’s, a reminder that the regime there is less stable under the influence of MBS than the older king. Markets have been relatively relaxed about the impact of the Other risks in this arena include the impeachment proceedings against Trump, NorthisKorea and Taiwan/Hong Kong. With the coronavirus as there a belief that central banks will maintain Republican’s controlling threatwill to easy monetary conditionsthe forSenate, longer the and realistic governments Trump is fiscal low and whilst North increase measures furtherKorea in thecould eventbe of troublesome, an economic it is unlikely Kim would risk a full scale war in itsimpact efforts on to slowdown. In the short term there will be some get sanctions removed. The recent Taiwan election with corporate earnings, but if the virus showed signs of spreading its resounding win for the pro independence candidate was globally in a significant manner there could be a greater shorta further slap in the face for China and tensions with that term hit to markets if sentiment were affected negatively. country, and within Hong Kong problems are likely to ebb On balance the likelihood remains that the economic effects and flow, although the prospect of direct military intervention of the remote. virus will not be long-term and economic activity will seem rebound later in the year.
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Valuation
E R E H E B D L U O H S E G A IM The second, and arguably the most important factor influencing markets is valuation. Unfortunately, valuation is not an exact science and care needs to be taken in comparing today’s PE, a commonly used valuation metric, to historical ones. The latter encompasses a variety of investment regimes and interest rates, with macroeconomic conditions very different to those being experienced currently. Empirically, one can observe a relationship between inflation and the PE. When inflation is low and thus interest rates are low PE ratios are higher. However, there is also another factor supporting the higher level of valuations seen in markets today and that is the volatility of the macroeconomic environment and the level of PE. Today, inflation and GDP volatility is low, which means there is less amplitude in the economic cycle with, as a result, higher valuations occurring. This scenario has also made it more difficult for managers relying on using business cycle factors when investing, or an investment process totally reliant on mean reversion. It is likely that the low level of interest rates and low macro economic volatility will continue to persist in 2020 and very likely beyond. Thus, while PE rations, especially in the US are above historical averages, and a factor behind the cautious stance adopted on markets by some commentators, the readings are not extreme in the context of the economic fundamentals that are likely in 2020.
The European market, where earnings growth over the past decade have lagged the States, is trading under 1 PE point expensive relative to its 1990 history and around the average of its CAPE ratio. The UK market which has been depressed for a number of years through Brexit uncertainty actually trades below its post 1999 PE and is over one point cheap with the largest discrepancy in valuation the domestic cyclical names. Even post Brexit the FTSE 250 mid caps have significantly outperformed the FTSE 100 since 1987, despite their greater reliance on the domestic economy, as these are generally faster growing names with a very different sector makeup from large caps. The inefficiency in this part of the market and reasonable valuations compared to history suggest mid and small caps are the place to be in UK equities. Japan is also a market which looks cheap relative to its long term history, although this also would take into account some of the bubble period when valuations were clearly trading in excess of realistic levels. Within the market in Japan growth has outperformed value significantly, with many of the sunset industries in Japan continuing to struggle to deliver earnings. The valuation of emerging markets in the short term is heavily influenced by the path of US interest rates, bond yields and its currency as significant US Dollar strength often forces domestic liquidity conditions in emerging markets to tighten. Emerging markets trade at a small discount to their long term average, although of course many funds utilised by investors in this area are avoiding the more lowly rated parts of the market such as Chinese banks and state owned oil companies. Notwithstanding this, looking at average 10 year returns from the current emerging market price to book ratio suggests returns in US$ could range between 5-15% p.a. suggesting this part of the world along with the UK market offers the best valuation opportunities for investors as long as earnings estimates come in somewhat near market expectations.
One factor investors need also to be cognisant of is that the sector weightings in regional markets vary. In the US the weighting to IT and Communication Services is higher than other Western markets and these sectors are more highly rated. The US weighting in Financials and Materials, which tends to be more lowly rated are considerably lower than in both the European and UK markets. Thus, the States has a higher exposure to growth stocks which have been suited by today’s low interest rate world where a declining discount rate applied to future earnings has allowed PE multiple expansion. The US has also benefited from stronger earnings growth over the past decade than other markets. The forward PE ratio on the S&P 500 is now a couple of points higher than its historic post 1990 average, but less overvalued on the post 1996 average. The valuation measure the US looks most expensive on is the Shiller CAPE PE which uses trailing 10 year average inflation adjusted earnings. Over the next 12 months the depressed numbers of the GFC period will drop out of this statistic, so the valuation measure on a cyclically adjusted basis in the States will also improve. One other factor to bear in mind is that commentators such as Jeremy Grantham at GMO have acknowledged, even though they themselves are a value house, that PE multiples since 1996 have traded at higher levels than previous periods of history. Looking at forward PE ratios (which assume that there will not be any major recession in the forecast year of earnings) suggests that forward 10 year returns from the States will be positive but in likelihood around the mid single digits. To the end of December the current bull market have been 129 months long, but its return of 378% had been considerably outstripped by the 1988 to early 2000 bull market which lasted 147 months and returned 582%.
A further point is that when considering the equity markets vulnerability to valuation risks, the influence of other asset class valuations must not be ignored. Back in 2007 the valuation excess was not so much in equities, but in higher risk segments of the credit market and property. Equities succumbed to the huge losses in such leveraged securities and the systemic risk that resulted. Today, spreads and corporate credit and other forms of high yielding debt have moved close to historical lows at a time when on the one hand the quality of some of this debt, especially in high yield has deteriorated, but on a positive note the stability of the economic cycle and lack of volatility in both GDP growth and interest rates is a positive for credit. An important difference today in credit markets is that debt is dispersed across a variety of institutions and is not just concentrated in the banking sector. As a result, there is not the same degree of systemic risk in the financial system as in 2007. For the rest of 2020 interest rates look likely to remain low, and recessionary concerns outside of an exogenous shock have faded, so a prospect of a significant rise in default rates remains low.
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Sentiment
SUMMARY
Markets can be vulnerable to a short term setback when the third factor looked at, sentiment, shows us that investors are excessively bullish. Whilst it can be dangerous to rely totally on these indicators to trigger action, they do provide an insight into investor behaviour and add a useful dimension in assessing market risk/timing. These indicators come in a variety of forms and are perhaps most useful for the US market.
The length of the current US bull market is the second longest on record whilst the economic cycle has broken previous historic records for the length of its upturn with the past decade the first since the 1850s that the US economy has not experienced a recession. Understandably investors are concerned that a cyclical reverse in both the economy and the stock market is close at hand. However, academic research suggests cycles typically do not end of old age, but rather when some form of excess develops (over heating in the economy or over valuation to a significant degree in the market), or as a result of an exogenous shock that affects either of these. Looking at the macroeconomic fundamentals and market valuation there is little sign of the excess sufficient to de-rail either the economic or market cycles in 2020. The US remains the dominant influence on markets globally, which after the buoyant start to the year by mid January had reached overbought territory in the short-term, but overall neither sentiment indicators or valuation are at dangerous extremes in the States.
Technical indicators such as the overbought/oversold (RSI) ratio on the S&P 500 Index is a useful indicator of short term moves over weeks rather than months. If the Index is 15% above its 200 day moving average, the market is very overbought. Today with the S&P 500 Index at 3290 the reading is around 10% above. Surveys of investor confidence such as the AAII (American Association of Individual Investors) tracks sentiment on a weekly basis. The historical average is 38% and readings for most of the last 12 months have been below this. To date in the West this has been a bull market, not really participated in by retail investors. Surveys of cash flows into US equity funds including ETFs showed an outflow during 2019, further reinforcing that retail investors have entered 2020 with cautious positioning overall. The US market by mid January was technically in over bought territory, which suggested markets could be vulnerable to short term bad news such as has occurred with the Coronavirus, but on a longer term basis sentiment indicators are not suggesting an end to the current bull market.
E G IMA
Perhaps the principal threat to the global economy and stock markets is an exogenous shock which would affect growth. This could either be through political/geopolitical events as markets are currently pricing in a second term for Trump with a pro-business administration in the States, or for Iran to enter serious retaliation for the killing of Soleimani which disrupts oil supplies to the West. Whilst either of these expectations could be called into question during 2020, which could result in short term bouts of volatility, it is unlikely a serious downturn will be driven by either of these factors this year. Investors have also been concerned about the market impact of an event such as the Coronavirus emanating from China. Analysis of Sars, Swine Flu, Ebola and Zika viruses show common reactions. There is typically an initial sell off during the early days of an epidemic as investors are uncertain how badly economic growth/markets will be affected. During the Sars crisis luxury, leisure and travel were the biggest losers. Previous crises were Sars (November 2002 – July 2003), Swine Flu (March 2009 – August 2010), Ebola (December 2013 – June 2016) and Zika virus (March 2015 – November 2016). In each of these events a sharp initial stock market decline quickly gave way to recovery. For example, during the Sars outbreak the MSCI China Index fell 8.6%, but rebounded by more than 30% in the three months after April 2003. In fact, history shows that the more equities fall initially the more they subsequently rebound and this type of event has historically been a buying opportunity rather than a sign investors should exit stocks.
E R E EH B D L U SHO
In Europe the ECB under Lagarde will need to be monitored to see if there is a change of policy regarding negative interest rates with, for example, the Swedish central bank now indicating that negative rates can also cause damage to the economic outlook. Governments themselves are now placing greater emphasis on fiscal policy, but with inflation remaining benign, the prospects of recession have been pushed further back with for example Goldman Sachs now arguing the US could go a further five years without a downturn. Whether it is Japan, the UK, the US, or even the Bundesbank, fiscal policy looks likely to be loosened in 2020 which should be a positive for growth in the following years too.
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Central banks have recognised that monetary policy to a large extent has run its course, and it remains to be seen whether increased fiscal policy will result in value type stocks in certain sectors performing better. Certainly the most expensively valued parts of the market today are some of the high growth disruptive equities which have been the best performers over the last five years. Again, this will also be driven by whether higher levels of fiscal stimulus by governments, even if limited, causes inflation expectations to rise, with this factor being the one most likely to lead to a renaissance for value type stocks if it occurred.
As discussed significant move to fiscal expansion if it resulted in an uptick in inflation would be a catalyst for outperformance of value stocks. Whilst we are not yet at this stage, this is a trend to watch. Even within growth investment there could be divergent trades as it is possible that traditional growth names could diverge from the Technology sector if the latter saw more unfavourable regulatory and tax regimes. A greater use of fiscal policy if it resulted in a rise in bond yields will also likely hit higher yielding names who have benefitted from the continued drift down in bond yields.
Observers of the US election should concentrate on some of the key battle ground states Trump unexpectedly won such as Michigan, Ohio and Pennsylvania and the importance of these local economies and their dependence on trade suggests for political reasons in the short term Trump is likely to ease back on his hard line rhetoric on trade. The fact which could have the most negative enduring impact on markets would be the victory of a leftist Democrat candidate ushering in less business friendly policies in the States.
Thus, whilst markets have been dominated on a day to day basis by short term news flow and what is often called ‘market noise’ the medium term direction of asset markets will continue to be driven by the three factors of fundamentals, valuation and sentiment. The macroeconomic fundamentals point to the persistence globally of a “goldilocks” (not too hot, not too cold) economic climate. This has favoured equities over the last few years. Valuations are mixed, with in particular those in the States above historical averages but are not at extreme levels, certainly when factoring in a persistently lower discount rate for equities. With volatility in the global economy both in terms of GDP and inflation low and relatively high levels of profit margins markets should continue to be able to live with higher than average valuations. As commented on, the Shiller cyclically adjusted earnings number will improve as the Financial Crisis period drops out of data. Sentiment, while elevated, is not yet dangerously bullish. Overall this combination is positive for equities generally. The greatest risks of a bear market in 2020 rest in exogenous events and for investors who have the ability to put in place some hedging of equity risks, perhaps through gold ETFs or US treasuries if these instruments suffer a price setback, or trimming equity exposure after a period of strength if markets become technically overbought are possible options. However, overall investors look likely to be rewarded for taking equity exposure in 2020, although there is a need to be aware in particular after a long bull market, setbacks as when they occur are likely to be swift and sharp with heightened volatility a factor when many market participants utilise quantitative trend following trading strategies.
Within the emerging world, India is currently struggling to stop its economic slowdown and despite all the concerns China has remained Asia’s fastest growing large economy. While it is less headline news indications suggest that over the next decade a further 220m people will move to clusters of super cities which suggests infrastructure spend in China will not drop off dramatically, a factor which is important for growth globally. As China continues to move to a more consumption driven economy, a Phase 1 Trade Deal does bring President Xi more time, justifying concessions to the US. Something for investors to watch this year is whether some established trends within markets change. Once again, there has been commentary about the possibility of a weaker US$. The rationale behind this is that relative growth rates between the US on the one hand and Europe/Japan on the other may shift. There is election uncertainty in the States and Trump has pressured the Fed to some degree into an easier monetary stance. In Europe any indication of a shift away from negative interest rates by the ECB under Lagarde could be a positive for the Euro. A weaker US$, or certainly one that is not showing excessive strength, would be a positive for emerging markets and Asia.
Strategy Team IRC 29.01.20
Graham is an investment researcher of international note and has been working in this area for over 20 years. He began his career in the stock broking industry before becoming an institutional fund manager where he practiced both in Ireland and the UK where he worked in senior roles with a number of institutions including Royal Life holdings, Guardian Royal Exchange and Abbey Life. Throughout his career, he has managed multi-million Euro funds and developed innovative investment fund concepts. Seeing the need for non biased, critical analysis of the investment industry, Graham began work as an independent investment researcher in 1992 and since then, principally, he has provided services to financial institutions. Graham is also a director of RSM Group, a leading UK investment research company. Director at Independent Research Consultancy Limited
Through his research process, Graham filters through the broad range of Irish and International investment fund managers for those investment managers who consistently perform best. He conducts in the region of 150 teleconference meetings and on site interviews with asset managers in UK, Europe, China, Hong Kong, Singapore and Australia. Following on from these meetings, Graham produces detailed research notes.
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10SME
TIPS
on
HOW TO GROW your
If it’s tough running a small business, it’s even tougher to grow it. Small businesses don’t have the resources of large corporates and for many business owners, just keeping the business going can feel like an uphill battle. In this environment growing the business may seem like a pipe dream. But it doesn’t have to be that difficult to grow your business. If you plan carefully, and work smarter rather than harder you can take your business to new heights. So, what steps can you take to grow your business?
Focus on what you do well
Keep your eye on the competition
Big businesses can mix it up, selling cakes and appliances, musical instruments and fashionwear, but if you have a small business you need to focus on what you do well. You can’t try to do too many things at once. Forget trying to compete with the big retailers or corporations find your niche and be the best you can in your small corner of the world.
It is not possible to compete with the giant corporates in your industry, but in any industry, it is essential that you know your competition. Only by understanding what your competitors are doing can you remain relevant and profitable in your own business.
As a small business you need to figure out what you do best. You need to find your business identity. Once you know what it is that you do best, you then have to concentrate on being the best at what you do. If you have recently grown your business and the expansion has had the effect of upsetting service delivery in a number of business areas consider going back to basics and make sure that, whatever your product or service, it is of the highest possible quality.
Do your market research. Find out what your competitors are doing and, equally importantly, what they’re not doing. Find the shortfalls in their products and services and then offer yours to potential customers as a better option, targeting where they fall short. There is also nothing wrong with trawling for ideas for your marketing strategies and campaigns, or keeping a beady eye on your competitors so that you know what they are up to. There is no point in re-inventing the wheel. Learn from your competitors. Big business does it all the time. If, for example, you have a small coffee shop, you should keep abreast not only of what the other small coffee shops are doing but also of what is happening in the larger coffee market. If Starbucks is changing the way that coffee drinkers are buying and consuming their coffee, it is in the interests of your business that you know exactly what the trends are so that you can adapt your product, service and marketing methods to keep attracting the consumers to your business.
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Paperless commerce
Make sure that you’re mobile
Taking the paper out of your business will save you time, effort and money. It will also help to improve productivity in your operation. When you take the paper out of your business you save money by saving on paper, ink and other stationery. You also save on machines such as printers and copiers and you save on the space needed to store all that paperwork.
The mobile device is the most popular way for Internet users to find what they seek. Google rolled out the mobile first indexing system in March 2018. This means that mobile websites rank higher on websites than the desktop versions do. It is therefore vital that your website is optimised for mobile or you won’t rank on Google search and you’ll lose out to your competition.
It is also a lot easier to find electronically stored data than it is to find information in real files and folders. Electronic data facilitates communication with other business stakeholders such as customers and suppliers. This means that you can finish off projects much more quickly and efficiently. Use all those saved resources to grow your business.
Marketing on social media More than 3 billion people use social media worldwide, so if you don’t have a social media presence you are missing out in a big way. Social media marketing offers businessmen/women an effective way to market their businesses. Social media marketing is typically a lot more cost effective than television or print. Most of the social media platforms offer efficient targeting based on demographics, buying habits, interests and other statistical metrics. This allowe you to optimise your advertising expenditure, spending your budget in all the right places, and on the people, who are most likely to buy your product.
Keep your business well connected Today, business is acquired and conducted online. Make sure that your business makes the best online impression. You need a high-speed connection that quickly downloads, meeting the expectations of your customers. Your connection should keep up with business growth. If your connection isn’t fast enough, you won’t get off first base when it comes to digitally marketing your business
Outsource non-core activities If you don’t have the resources to take on new projects, acquire new clients or recruit or train staff, find freelancers who can help you. Don’t hold back your business expansion through lack of resources.
Put the customer first Customer service must remain always your number one priority. It must permeate the fabric of your business. Growing your business is as much about retaining current customers as it is about acquiring new customers. If you are not looking after your current customers, you’re not ready to find new ones. Loyal customers are key to growing your business.
When you hire freelancers, what you pay them will cover not only their labour but also the consumables, software and any other resources that they use in the completion of the project. This means that you could increase your income without increasing your overhead expenditure.
Google My Business Google has designed this tool to help businesses to enhance their online presence. Here you can post details of your business, post events and even add customer reviews. You can include a list of products and services that you offer and include opening and closing times. Use this service and customers looking for companies like yours will find you. This is the power of the organic search.
Optimising with Google Maps Google Maps is an essential aspect of your online presence. Browsers seeking products and services will use Google Maps to find the businesses that supply what they’re looking for. Great SEO will ensure that your business climbs the ranks and gets you the attention that your business deserves.
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HABITS OF OF CONSISTENTLY CONSIST HAPPY HAPPY PEOPLE PEO LE
10 Happiness is not a choice or a destination. It’s a habit. It’s the outcome of committing to yourself on a daily basis. Every day from the minute you rise, your actions and thoughts dictate how happy you are.
Happiness is not something ready-made. It comes from your own actions. The Dalai Lama
Happiness comes from living in the moment, from appreciating the small things in life and from small acts of kindness. You have to court happiness every day, much as you would a lover until happiness itself becomes a habit. We’ve looked at the habits of consistently happy people and we’ve outlined them below to help others to apply the habits that lead to happiness.
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THEY ARE ALWAYS OPTIMISTIC Happy people stay happy because they have an optimistic way of seeing things. Happy people view life through rose-tinted spectacles. Your first thoughts of the day will establish how you’ll feel for the rest of the day. It’s far easier to maintain a good feeling about the day than to try to recover a good day from a poor start. Happy people don’t see problems. They see opportunities. They always look for the silver lining in every situation. Even when they are beset with difficulties, they’ll use the experience to learn something new, enhancing their sense of self-realization.
They understand the importance of a healthy psychological outlook. They work from a position of personal growth in the journey of life.
They don’t liken themselves to anyone else. They know that that’s toxic and a sure way to feel inferior and to lose out. Happy people compare themselves only to earlier versions of themselves. They do this, because they aim to grow stronger and better day by day. Seeking self-improvements along the way.
THEY ARE GRATEFUL Everyone should have goals in life, something to strive for, but this doesn’t mean that you can’t be grateful for what you have. When you’re grateful for life’s blessings you need nothing more, you’re happy with what you have. Happy people are thankful for even the smallest things in life, fresh air and birdsong, waking up in good health and the ability to change the things they don’t like.
They know how much they have and recognize the wealth of good that surrounds them.
THEY ARE KIND Kindness is a two-way street. When you are kind to someone both of you get a kick out of it. Happy people make a habit of carrying out random acts of kindness. It becomes part of their being. They’re polite, helpful and they freely compliment others. They are genuinely kind and interested in the well-being of others. They do all of this without expecting anything in return from anyone anywhere.
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They want to spread goodwill and be the change they want to see.
THEY HAVE DEEP FRIENDSHIPS Happy people do not have to have dozens of friends, but the friendships that they do have are nurturing and deep. Happy people develop true friendships. They don’t waste their time with trivial shallow relationships. They prefer to cut those loose to make more time for their special friends. Special friends are there to help when life is difficult. You can bank on their support when you really need them and when it’s time to celebrate, they’ll be there too.
A true friendship serves both parties. True friends uplift one another and help when help is needed. A true friend knows what interests you, engaging you in interesting discussions and understanding the contours of your inner self.
THEY CHANGE WHEN THE GOING GETS TOUGH Life never goes according to plan. There are always testing times along the way, from health issues, to relationships or problems in the office. The only thing that you can be sure of in life is change and we must learn to cope with that change as it happens.
The don’t indulge in negativity. They know exactly what to do to make themselves feel better and that’s what they do.
Happy people have the means to manage and recover from tough times, learning from each rough patch in life. They have a sense of self and they’re self-reliant in good times and bad. They know how to cope with life’s challenges.
THEY ARE FORGIVING When someone by their actions hurts you, don’t hold it against them. Learn from the incident and then thank the perpetrator and send them on their way. People who mindlessly hurt others are uninformed. They can’t see beyond their own selfish needs.
They take the conduct without reacting and allow the person to leave.
Happy people can recognise the people who have strayed from the path of self-realisation. They can see those who have inner struggles. They also accept that those battles are not with them.
BUILDING A ROAD TO A HAPPY LIFE The only way to happiness is to develop habits that will lead to a happier and more fulfilled life. Happiness is not a destination or a decision you take. It is a deliberate course of action.
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We know that happiness does not happen by accident. It is the result of positive actions.
THEY HAVE GOALS AND THEY ACTIVELY PURSUE THEM Life is all about striving for improvements. Most humans strive to improve their lives, and in their struggle to get to a better place, they may set goals along the way. The problem is that many people don’t have the staying power to keep striving for their goals so many will drop the ball along the way. The achievement of goals requires a stubborn pursuit of the outcome. Without uncompromising pursuit your goals are nothing but pipe dreams.
Happy people are driven by their goals. They don’t deviate from the path to achievement. They have learnt that to focus unblinkingly on the goal leads to happiness.
THEY ARE ACTIVE Happy people know the value of being healthy. Regular exercise contributes to their happiness since the body excretes happy hormones called endorphins into the system during exercise. Regular trips to the gym can lead to a deep sense of wellbeing. Happy people also use exercise to reduce stress. When life throws them a curve ball, they manage any resulting anxiety with a trip to the gym. They know that exercise frees the body of stress and anxiety, and they make good use of it.
Good physical health is an essential part of psychological well-being, especially as we head into our older years.
THEY GROW THEIR INNER BEINGS Humans, from time immemorial, have looked into their souls for answers to life’s deepest questions. Great philosophers such as Socrates and Plato have written tomes on the subject of man’s search for understanding.
They know that the very cornerstone of a contented life lies in knowing yourself.
Happy people are comfortable spending time with themselves. They frequently take mental strolls into their inner being, seeking time alone in the quietness of their souls. Quiet time for them is a way to nurture the spirit and build their ideal self. Happy people have a need to come to grips with themselves. They want to understand what makes them tick and they want to build a close relationship with that inner being. They’ll escape into that place when the world becomes taxing and seek inner peace.
The first steps to happiness The best way to build new habits is to set small easy to achieve goals and then to stick to them. The same is true in setting off on the path to happiness. Take the list of the ten habits and then set yourself at least one goal for each.
For example; your goal for living a healthy life might be to exercise for half an hour three times a week. Don’t make stretch targets. Make them easy to accomplish and then stick to them. Keep a journal and a timeline and keep growing your goals in small increments.
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A journal is a handy way to keep track of your progress. Record as much as possible, including items such as why you may have failed to accomplish your goals. This could help you to understand the circumstances that make you lose your way in the pursuit of new habits.
KEEPING PACE WITH A CHANGING WORK CULTURE With each new year employers should take a good look at the developing labour trends and regulations to ensure that they keep abreast of the changes. Currently, more and more people are delving into the issues of people management and managing changing organisational cultures. As we emerge into a new decade it is worth examining the growing trends in organisational culture and people management to understand how it will affect employers.
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Work/life Balance, Health and Wellness Any stigma attached to mental health and stress has long fallen away. Now people talk constantly about the need for a balanced work/life approach and the importance of health and wellness. This is seen as essential to the reduction of stress and an improvement in mental health. This interest in stress reduction in the workplace applies to all employees no matter their gender or age. But younger employees are more unyielding when it comes to fair treatment. While those of us who have been around for a while may put up with a rude manager, younger people reject such behaviour. They are far more likely to report incidents of rudeness than their older colleagues and why shouldn’t they.
Some people choose to stay always on but that does not mean that employers have the right to expect their workers to work 24/7. As an employee what can you do? It may be worth your while to appoint an employee assistance programme and encourage your employees to speak in confidence about personal or work issues to an external professional. You could also consider arranging training for employees to teach them to identify and manage mental health problems in the workplace.
Another growing trend is the always at work culture brought about by smartphones that bring business calls, instant messages and emails into the home no matter the time of day. This is particularly true for a growing number of people that deal with global networks of customers and suppliers.
In Ireland there is a move toward the Nordic model of reverence for early childhood development. Legislation has changed recently to allow for either parent of a child of 12 years old or less to take up to 22 weeks’ leave. From September 2020, this will increase to 26 weeks. The employers may not break the employees service nor may they discriminate against them in any way.
Parental Leave
The leave is unpaid so it can end up an expensive exercise for families that take it up. Typically, mothers are more likely to take up the option, but fathers are entitled to the leave as well. Parents may take the leave in a single block or split it into two blocks of at least six weeks. In reality many parents negotiate with the employer to break this time up into smaller bits or even part time work. On top of this, in November, Parent’s Leave was introduced. This legislation allows parents to take as much as two week’s leave during their child’s first year. This is paid for by the state. We expect this paid leave to increase to nine weeks in future. As an employer what should you do? Embrace the legislation. Don’t see it as a problem. Discuss it with your staff and adjust your policies and procedures to include the new legislation.
It has become quite common today for companies to conduct regular employee satisfaction surveys. Firms understand the importance of retaining and recruiting the best talent in a world where skills are hard to find. They use the information obtained in these surveys to discover their strengths and ascertain areas where they can improve. In this way they make themselves an employer of choice for the purposes of recruitment and retention.
Employee Satisfaction Surveys
As an employer what can you do? Do an employee satisfaction survey. You will have to employ an expert to do it, as it must be confidential and question construction is all important. The external service will also help you to benchmark the outcome.
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Flexible Working
As traffic congestion increases and technology improves more businesses are embracing the idea of flexible work. Wi-Fi and cloud software have had an impact on this trend. It is no longer necessary to have a dedicated desk environment. Hot desks are the new trend. Many employees now work from home, avoiding the stress of peak hour traffic, saving the environment and the cost of running an office. As an employer what should you do? For some businesses, flexible work is not an option. Some work demands the presence of the employee at work during set hours. In this respect retail comes to mind. If you can introduce flexi work, you will have to put some thought into it. This type of work model requires a high degree of trust. You’ll also have to change your performance measures to evaluate outcomes rather than hours worked.
Employment Contracts Up until recently, employers took their time to issue contracts of employment to new employees. Now there is legislation in place that makes it an offence to withhold contractual information beyond five days after the commencement of work. This applies to both part time and fulltime employment contracts. Having such contracts on hand is good employment practice. The Employment (Miscellaneous Provisions) Act 2018, came into being on March 4, 2019. It covers a number of additional employment clauses that could affect your employment relationship. As an employer what should you do? Go through all your contracts of employment and make sure that they are relevant and that each is signed.
IN CONCLUSION Cultures are changing. Ours has become broader and more tolerant. Embrace the changes. It will benefit your business. Make sure that you have taken account of all the mandatory changes. You shouldn’t see the legislative changes as a nuisance. All will eventually benefit from them. Be the best employer you can be, and you’ll attract and retain the best employees. This is a sure way to improve the value of your business.
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Dervilla Whelan
Sarah Keane
(BBS, CTA) Managing Director
(BAAF, FCA, CTA, QFA) Director
Dervilla Whelan is the Managing Director of DLS Capital Management Ltd and also one of the founding members of DLS Partners. She was previously a taxation partner in Baker Tilly O’Hare (now part of Baker Tilly Ryan Glennon) and is a graduate of Trinity College, Dublin and the Institute of Taxation in Ireland. Her key skills include advising clients on all aspects of their financial affairs, including advising on the appropriate structures required for all types of investments and pensions. Dervilla is heavily involved in the Family Office service for our high net worth clients. Dervilla’s involvement with both DLS Capital Management Ltd. and the tax practice, DLS Partners, ensures that her clients benefit from a holistic approach to all of their financial affairs
Sarah Keane is a graduate of Dublin City University in Accounting and Finance and a Fellow of the Association of Chartered Accountants (FCA). She is also a member of the Institute of Taxation in Ireland (CTA), and the Professional Association for Financial Services in Ireland (QFA). Her key skills include advising clients on all aspects of financial planning, including retirement planning strategies, taxation and investment advice. Sarah is highly experienced in the preparation of investment financing strategies for individuals and companies. Sarah is also heavily involved in the Family Office service for our high net worth clients.
Graham O’Neill
Stephen Cahill
Graham is an investment researcher of international note and has been working in this area for over 20 years. He began his career in the stock broking industry before becoming an institutional fund manager where he practiced both in Ireland and the UK where he worked in senior roles with a number of institutions including Royal Life holdings, Guardian Royal Exchange and Abbey Life. Throughout his career, he has managed multi-million Euro funds and developed innovative investment fund concepts. Seeing the need for non biased, critical analysis of the investment industry, Graham began work as an independent investment researcher in 1992 and since then, principally, he has provided services to financial institutions. Graham is also a director of RSM Group, a leading UK investment research company.
Stephen Cahill is the Tax Manager at our Tax Practice, DLS Partners. He graduated from DIT and is a member of both the Association of Chartered Certified Accountants (ACCA) and the Irish Tax Institute. Stephen is responsible for all areas of Tax, including, VAT, PAYE, Income Tax, CGT and Corporation Tax. He also is involved in the preparation of Financial Accounts for sole traders and limited companies and assists in the preparation and review of monthly management accounts for larger corporations.
Independent Consultant
(BSc (Marketing), ACCA, CTA) Tax Manager DLS Partners
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RANGE OF SERVICES RETIREMENT PLANNING
FINANCIAL PLANNING
•• •• •• ••
•• Financial Planning is central to our
Tax-effective funding for retirement. Income Planning for your retirement Personal Fund Threshold calculations Protecting the underlying value of your pension fund throughout retirement •• Advice on the most tax effective drawn down of your pension vehicles •• Taking transfers from Defined benefit Pension Schemes
PENSION STRUCTURE ADVICE •• Personal pensions •• Self Invested Personal Pensions •• Company/Executive pensions
- Defined Benefit Schemes - Defined Contribution Schemes •• Small Self Administered Schemes •• Personal Retirement Saving Accounts (PRSA’s) •• AVC’s
service offering
•• We compile fact finds based on client’s
personal and financial details •• We produce a Financial Plan for each client, showing their current financial position and their future financial objectives. •• The Financial Plan will encompass all areas of a client’s financial position, e.g. investments, borrowings, protection policies and pension policies •• Financial Plans are reviewed on an annual basis, taking into account any changes in a client’s personal and/or financial circumstances.
FAMILY OFFICE SERVICE •• Preparation of Quarterly Net Worth Statements
•• Preparation of a comprehensive
INVESTMENT ADVICE •• •• •• •• •• •• ••
Managed Funds Exchange Traded Funds Unit Trusts Investment Trusts Tracker Bonds Deposits Employment and Investment Incentive Schemes (EIIS) •• Structured Products •• Qualified Investment Funds (QIF) •• Renewable Energy Investments
•• •• •• ••
database which contains all information on Assets and Liabilities, thus facilitating instant access to information Centralisation of costs on all Personal & Investment Properties Appraisal of Investment Opportunities Monitoring of Investments Attend meetings relating to Investments on behalf of clients
DLS Capital Management 25 Merrion Square Dublin 2
www.dlscm.ie info@dlscm.ie
DLS Capital Management is regulated by the Central Bank of Ireland
(p) 01 661 9086 ( f ) 01 661 9180