In many respects, it feels like the gripping but disturbing show that was 2020 was recommissioned
for a new season in December. With the US election largely behind us, effective Covid-19 vaccines
ready to be deployed and the UK coming to the end of the Brexit transition period, it was reasonable
to expect the producers to struggle to come up with new twists to keep their plot credible. Of the
three main storylines, the US election one has become the most tedious, with President Trump
and a thinning group of supporters continuing to contest the election results without any shred of
evidence. Realistically, a Biden presidency hasn’t been in question for weeks now but Senate runoff
elections in Georgia in the first week of January will determine whether the Democrats can add
a Senate majority to their House majority. Such an outcome would likely lead to adjustments in
markets as it would imply greater fiscal spending and, potentially, increased regulation.

As widely anticipated, negotiations between the UK and the EU went to the wire, but a trade deal
was finally agreed on Christmas Eve, paving the way for a smoother transition out of the EU than
would have been the case otherwise. However, the deal excludes services, which represent about
80% of the UK’s economic activity and more than 40% of UK’s exports to the EU, and are thus
critically important. While it is a shame that no deal could be agreed in time for the end of the
transition period in 2020, the fact that an agreement was reached for the trade of goods creates a
platform for further negotiations which will take place over the next few months. This storyline is
the one with the potential to last the longest and will impact the UK economy deeply. It is likely to
fade into the background for long periods of time though, before resurfacing episodically (maybe
for another Christmas special?).

The most significant new twist added in December is the new variants of the Covid-19 virus,
spreading alarmingly rapidly in the UK and the rest of the world. While the positive news on
vaccines in November lit the light at the end of the tunnel, those mutations have rendered the path
more sinuous. For now, the new variants appear to be a lot more contagious, especially with the
younger population, but not more deadly. Rapidly increasing numbers of cases put, once again,
pressure on health services and threaten a return to full lockdowns across many countries. Contrary
to lockdowns at the start of the pandemic, however, vaccines are now being rolled out so, provided
they still prove as effective against this new variant, the prospect of a much-improved economic
outlook for the second half of the year remains intact. Whilst this development is unwelcome and
brings renewed disruption, governments around the world ought to be better equipped to deal with
it leading only to a postponement of the recovery rather than a cancellation.

All things considered, in our view the global economic outlook remains brighter currently than it
was just a few months ago but volatility is likely to remain the name of the game.

In December, the TB Wise Multi-Asset Growth fund was up 5.7%, ahead of the CBOE UK All
Companies index (+3.6%) and its peer group, the IA Flexible Investment sector (+2.6%). For 2020 as
a whole, the fund returned 11.8%, more than 5% ahead of its peer group and more than 22% ahead of
the UK market. We weren’t able to reduce volatility as much as we would have hoped, but are still
pleased with this outcome given how dramatic the year proved to be.

As in 2020 as a whole, our contributors to performance in December came from a mix of strategies,
from mining to UK smaller companies to private equity. This year, more than any other in recent
memory, diversification has proved its worth.

Portfolio activity was limited during the month. We rebalanced our Asian equity exposure towards
our value manager from the Aberdeen Standard Asia Focus trust towards the Fidelity Asian
Values trust. We also, reluctantly, closed our position in the Church House Tenax Absolute Return
Strategies fund, thus reducing our Defensive bucket in order to be ready to take advantage of new
opportunities. This fund performed well for us in its intended use (cash-plus product) and we will
happily invest in it again when we next want to protect the portfolio against downside risk.

Vincent Ropers31 Dec 2020
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