In late 1918, after four years of carnage, French Marshal Ferdinand Foch, the Allied Supreme Commander, forced Germany to sign the armistice that ended World War 1. The venue was a train carriage - the Compiègne Wagon.
Heading into the Battle of France in 1940, with almost evenly matched troops, and more allies, the French must have expected another train ride soon. And that’s exactly what happened. In just six weeks! In June 1940, Adolf Hitler pointedly looked at Foch’s statue before starting the negotiations, in the same carriage, to dictate a French surrender.
France’s plans had clearly gone off the rails! The reasons are still hotly debated, but it is largely agreed that the French strategy was based on tightly controlled battles, a legacy of World War 1. The French had prepared well, but for the last disaster! They were surprised by the flexibility and mobility the Germans displayed. But failure to anticipate is only one path to disaster. Before we go further, we need to talk about 50,000 points!
1. What was eagerly anticipated following Biden’s triumph was a stimulus. He didn’t disappoint, announcing a 1.9 trillion USD package. With multiple reports pointing to global commerce leaning east towards Asia now, the Indian market is bound to get a good share of this liquidity. The proof - the net inflow of foreign portfolio investment (FPI) in the current financial year is now over Rs 2.38 lakh crore, the highest ever in a fiscal year!
2. More good news is that inflation cooled to 4.6 per cent in December 2020, giving some respite to consumers. This also reduces the pressure on the RBI to increase rates. That offers comfort in a year where the GDP is set to contract by 7.7%, a first since 1952. But we’re much better off than the earlier predictions of over 10%.
3. TCS became the second Indian company to hit a market cap of Rs.12 trillion, but the showstopper last month was the Sensex hitting 50,000 points for the very first time. Since we get asked a lot about this, if you find yourself tempted to withdraw, do think of those who did it when the Sensex was at 40,000 and are now wishing they didn’t! It took the Sensex 35 years to touch 25000. It got to the next 25000 in just 6 years, despite the worst crisis in the contemporary era! We anticipate nothing but stellar growth ahead.
4. The “budget never seen in 100 years” didn’t have much for taxpayers, but with significant spends expected in healthcare and infrastructural projects, the equity markets seem to have given it a thumbs up. On the flip side though, increase in expenditure without any uptick in revenue means a fiscal deficit - pegged at 9.5% (of GDP) for FY ‘21. That does mean chances of inflation, but what we need now is growth and employment, which the government seems to have budgeted for. Tune in to our YouTube channel for a detailed Budget conversation on Wednesday, 3rd February at 5.30 PM.
Meanwhile, just as inflation isn’t the economy’s biggest risk now, wars aren’t the real threat now. To quote Bill Gates, “Not missiles, but microbes.” SARS in 2003, Swine Flu in 2009, Ebola in 2014, we were warned. George Bush urged us to be better prepared, back in 2005, imagine! But in early 2020, we thought this was just a kind of flu, like the others we had defeated.
Despite the warnings, there was a failure to perceive. And when we did perceive, there was a failure to act. Lockdowns and social distancing were fashionably late. Governments fumbled, giving the virus business-class tickets for a global tour!
What does all this have to do with wealth management? Think about it - not having an emergency fund, not reviewing investments, staying invested in assets that are no longer growing - are failures to anticipate, perceive, and act. Our efforts are to help you prevent this - through asset allocation and diversification, and portfolio reviews, scans and reinvestments. Signs and science, we understand both, and that will ensure your financial goals stay on track. Thank you for reading.
Indices and benchmarks in January