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Welcome to our Mid-Year 2020 Outlook publication. 

The implication of calling something ‘Outlook’ is that we immediately put pressure on ourselves to make predictions about the future.  We have always shied away from this and, instead, focused on long-term themes which we see as inevitable and inescapable. These include: demographics – the ageing of western populations; the emergence of new economic powerhouses; and the unstoppable rise of technology and healthcare. 

Numerous publications at the turn of this year adopted the heading “2020 Vision”; it is safe to say no one saw this pandemic coming. It goes without saying that the future is always unpredictable; however, these past few months have been so strange and the outlook is even more obscure than ever. Investment decisions are hard at the best of times, but with data outside of any normal parameters and a huge range of potential outcomes – from a second or third wave of the virus, to how quickly economies can recover and the long-term geopolitical issues – it is harder than ever. 

We have maintained our philosophy. We try to identify quality businesses with structural growth opportunities and the strong finances which can take advantage of these over the long term. As a style this has worked well through this current crisis. Strong companies have simply got stronger.

So, what happens next? Abraham Lincoln used to enjoy repeating the fabled story of an Eastern monarch who asked his counsellors to come up with a single sentence which would work in all circumstances. The result was ‘And this too shall pass away’. He loved the fact that it chastened in the ‘hour of pride’ and it consoled in the ‘depths of affliction’. 

Whilst we continue to reflect on what has happened to the world in the past few months and the human cost, we must also keep our eyes on the horizon knowing that things do not stand still. The power of human ingenuity will win in the end and this virus too will pass away. 

As we move into the next phases of the post-crisis world, we will have to contend with ‘times like these’ – a more indebted, less global, and more digital society. We may have to deal with higher taxation, uncertain inflation, protectionism and populism, whilst all the time navigating the moves from global to local supply chains, and from physical to digital.

We look forward to the challenge of looking after you and your investments in this new world.

Graham Storrie

Managing Director, Adam & Company

 

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    The virus has accelerated changes which were well underway, and the most important issues which could affect our lives are deglobalisation, populism, and the divergence of the world’s two superpowers.

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    The virus has accelerated changes which were well underway, and the most important issues which could affect our lives are deglobalisation, populism, and the divergence of the world’s two superpowers.

    “If the coronavirus is a disease of the hyperconnected world, surely the response should be to unplug and raise walls? Hopefully not. ”
  • Our connected global society is becoming increasingly vulnerable to the rapid spread of political agendas, social media trends and biological viruses alike. 

    Our connected global society is becoming increasingly vulnerable to the rapid spread of political agendas, social media trends and biological viruses alike. 

    “When something goes viral like this, it is all about our networks”
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    As nations across the globe endeavour to slow the spread of the coronavirus and protect our societies, the science of human behaviour has never been so imperative.

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    As nations across the globe endeavour to slow the spread of the coronavirus and protect our societies, the science of human behaviour has never been so imperative.

    “Nudges work for a large proportion of the time, however total compliance was needed to stop the spread”
    “Now more than at any time in our history we will be judged by our capacity for compassion. Our ability to come through this won’t just be down to what government or businesses do but the individual acts of kindness that we show each other.”
    Rishi Sunak, Chancellor of the Exchequor
  • In an effort to contain the spread of Covid-19, governments across the world turned to the big tech giants and telecom companies for help.  Do our mobile phones hold the key?

    In an effort to contain the spread of Covid-19, governments across the world turned to the big tech giants and telecom companies for help. Do our mobile phones hold the key?

    “Big Brother is watching you”
    George Orwell, 1984
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    Given the incredible financial and social costs of this disease, it has never been so obvious that prevention is better than cure.

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    Given the incredible financial and social costs of this disease, it has never been so obvious that prevention is better than cure.

    Technology shares have been outperforming healthcare ones for years now. The stock market gets very excited about growth and speed and shiny new ideas, as typified by the phrase ‘move fast and break things’, which was part of Facebook’s modus operandi in the early days. The ethos is to push as fast as you can to be the first to Invent something, and not to worry if things go wrong.

     

    Many tech start-ups still live by the phrase ‘fake it till you make it’. In Silicon Valley, you tell everyone you’ve got the best thing ever, raise money on the back of it, and hope it all works out. This is perhaps most famously embodied by health technology company Theranos, which claimed to have invented a new way of blood testing. As described in the fantastic book ‘Bad Blood’, it hadn’t and a company once valued at $9b collapsed.

    The drug company slogans seem a little dull by comparison:

    'Doing now what patients need next' ROCHE

    'To help people do more, feel better, live longer' GSK

    'To build a leading, focused medicines company powered by advanced therapy platforms and data science' NOVARTIS

     

    The drug industry has a different culture and different rules to technology. ‘First cause no ill’ is the thing that medics sign up to – thankfully, given the ‘things’ they could break are you and me. Drug development has strict protocols involving testing for safety and efficacy, thus dictating a slow, science-based approach. However, for ‘unmet needs’ this can be accelerated, as seen in the rapid development of new cancer therapies.

    There has never been an unmet need like the one that brought the world to a stop. Fortunately, the global pharmaceutical industry sprang into action to combat Covid-19.

    This broadly followed three courses: examining anti-virals which would slow the progression of infection and act as prophylactics; anti-inflammatories to reduce mortality when the virus inflames the lungs; and vaccines, the most important strand in drug development for this crisis, and arguably for the past 200 or so years. These will give us immunity and allow normal life to get back on track.

    Forty years ago, the World Health Organisation (WHO) declared smallpox an eradicated disease. A virus which killed one in ten people in the eighteenth century was dead. It started in 1796, when one of the most important developments in human history took place. The English scientist Edward Jenner cut into the skin of an eight-year old boy called James Phipps and infected him with cowpox.

    Cowpox was a benign virus, and Jenner’s years of observing agricultural communities helped him realise that exposure to it could prevent someone getting the altogether more deadly smallpox virus – milkmaids were seemingly immune. The mild cowpox virus provoked the immune system to produce antibodies, which were able to fight off a future invasion of smallpox.

    We are on the cusp of eliminating other diseases too

    The discovery that cervical cancer was caused by the Human Papillovirus (HPV) led GSK and Merck to develop vaccines and now teenagers receive this injection. It should eliminate this disease in a generation or two. In a similar way, a meningitis vaccine is given to children in the developed world and, increasingly, in developing countries.

    Whilst new products for the likes of shingles and dengue fever are proving successful, the biggest prize at the moment is probably a vaccine to combat malaria. This highly infectious disease – provoked by parasites carried by mosquitoes rather than a virus – continues to cripple the development of tropical and sub-tropical regions around the world. The 200 million infections a year result in around 500,000 deaths.

    Unlike many treatments, vaccines are also extremely cost-effective when compared to the financial and social costs of treating the underlying diseases. WHO estimates the cost of the polio vaccine at 10 pence.

    The speed of development of potential Covid-19 vaccines is largely due to international cooperation and the sharing of technology across borders – unusual in the highly competitive market for drug development.

    Governments have helped with funding as have international agencies such as CEPI (the Coalition for Epidemic Preparedness Innovation), the WHO and the Wellcome Trust. For Covid-19, CEPI funded many vaccine development projects around the world and coordinated information sharing and the use of common technology, such as GSK’s ‘adjuvant’ platform which will boost their effectiveness.

    As a result of these efforts, the years-long process of understanding the virus, examining and screening candidate compounds, testing for safety and efficacy and regulatory approval has been cut to a matter of months.

    There have been many mis-steps in tackling the outbreak, from testing to protective equipment.  However, the speed of modern science in developing vaccines has been astonishing. Given the incredible financial and social costs of this disease, it has never been so obvious that prevention is better than the cure.

     

  • communication technologies have progressed immensely in recent years, providing a vital source of connection in distanced times.

    communication technologies have progressed immensely in recent years, providing a vital source of connection in distanced times.

    “It is during our darkest moments that we must focus to see the light.”
    Aristotle
    “It is a fair, even-handed, noble adjustment of things, that while there is infection in disease and sorrow, there is nothing in the world so irresistibly contagious as laughter and good humour.”
    Charles Dickens

Contributors

Graham Storrie

Managing Director

Stuart Dickson

Investment Manager

mark ivory

Investment Manager

Susan Boyd

Investment Manager

Dugald barne

Investment Manager

Kay Bendall

Investment Manager

cameron-glasgow

David Boswell

Investment Manager

Allan Cameron

Investment Manager

Cameron Glasgow

Investment Manager

Kathy McGibbon

Investment Manager

Linsey McWalter

Investment Manager

Simon Murphy

Investment Manager

John Peters

Investment Manager

Peter Bottomley

Investment Analyst

Ruairidh Stewart

Investment Analyst

Graham Storrie

Managing Director

Stuart Dickson

Investment Manager

mark ivory

Investment Manager

Susan Boyd

Investment Manager

Dugald barne

Investment Manager

Kay Bendall

Investment Manager

David Boswell

Investment Manager

Allan Cameron

Investment Manager

cameron-glasgow

Cameron Glasgow

Investment Manager

Kathy McGibbon

Investment Manager

Linsey McWalter

Investment Manager

Simon Murphy

Investment Manager

John Peters

Investment Manager

Peter Bottomley

Investment Analyst

Ruairidh Stewart

Investment Analyst

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IMPORTANT INFORMATION

Issued by Adam & Company Investment Management Limited (Adam), which is authorised and regulated by the Financial Conduct Authority. Adam is registered in Scotland number SC102144. Financial Services Firm Reference Number 141831. Registered Office: 25 St Andrew Square, Edinburgh EH2 1AF.

The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Past performance should not be taken as a guide to future performance. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.

The information on this webpage is not intended as an offer or solicitation to buy or sell securities or any other investment or banking product, nor does it constitute a personal recommendation. The information is believed to be correct but cannot be guaranteed.

Any opinion or forecast constitutes our judgement as at the date of issue and is subject to change without notice. Nothing in this material constitutes investment, legal, credit, accounting or tax advice, or a representation that any investment or strategy is suitable for or appropriate to your individual circumstances. The analysis contained within this webpage has been procured, and may have been acted upon, by Adam and connected companies for their own purposes, and the results are being made available to you on this understanding. To the extent permitted by law and without being inconsistent with any applicable regulation, neither Adam nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such analysis.

About Adam investments

We offer discretionary investment management to individuals and their families, and to charities. We take a long term approach to investing and we believe this gives us an advantage in a world where markets and media are increasingly focused on short term news.

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