Consumer spending accounts for between half and two-thirds of Gross Domestic Product (GDP) in most countries.  In the UK, it accounted for 62% of nominal GDP in Dec 2020 and is the key engine that drives economic growth.  Over the past year the enormous stimulus packages used to combat the economic impact of lockdowns that were undertaken by Governments world-wide, have resulted in consumers being flush with cash.  We have already witnessed that the build-up of excess savings has resulted in an increase in expenditure on food, clothing, health, leisure, and strangely, second-hand cars.  In addition, many non-discretionary categories of spending such as utilities, financial services & insurance and healthcare are now close to their pre-pandemic levels. However, the global lockdown has caused supply chain disruptions with sales held back by record low inventories of many items, the most notable of which are computer chips.

Another feature of the pandemic has been the surge in on-line gaming and asset trading, especially in cryptocurrencies.  These are notoriously volatile with the price on any given day about as predictable as the flip of a coin, evidenced by the fact that the most well-known of these, Bitcoin, recently shed more than a third of its value after doubling in value since the start of this year. The response of the regulators and Central Banks to the explosion in these is yet to be determined with a report by the US Fed due later this year.  What is clear is that the block-chain technology is here to say and the digital ledger will have a dramatic impact on many industries, both positively and negatively and we need to be diligent in this regard when we review our investments.

Contrary to the old adage of sell in May and go away, global markets were mostly up with the MSCI increasing by 1.3% and the S&P 500 up by 0.6%.  However, the large technology stocks in the US remained under pressure with the NASDAQ down by 1.5%.  The FTSE 100 was up by 0.8% as was the FTSE 250 Index. Small caps were mixed with the Fledging Index performing well, up by 3.9% as compared to the Small Cap Index which was up by 2.0% and the AIM All Share Index which was down by 2.2%.

By comparison, our portfolio performed extremely well during the month, increasing by 1.96% and, after allowing for expenses, resulting in an increase in the NAV of 1.87%.  There were no changes to the portfolio during the month and cash received by way of dividends resulted in a slight increase in the overall cash position from 2.0% to 2.1% as at the end of May.