I found little to write about last week, even though a few things happened. This was mainly due to the fact that we have yet to experience the wider consequences of the decisions which have recently been taken.
Last week saw the Chancellor introduce a range of measures to try and help spur the recovery, however they do seem to have missed the target so far, with investment markets not really feeling the benefit.
The suspension of stamp duty will, for some, be a great saving but I am not sure how many people will be thinking about moving right now (unless downsizing) and I suspect the government knows this, as there are certainly areas which would have had more direct benefit for society, like for example, reducing the VAT on all goods, not just within the hospitality sector (although they more than deserve a break in all of this!).
However, they cannot just keep giving and all of the assistance from the likes of furloughing and self-employed grants have to be paid for, as we will doubtless find out in time.
I think that we are now entering the second phase of the virus in terms of its re-emergence in many countries (and its lack of containment in others) and this is causing much nervousness within investment markets, with Gold prices rising as a safe haven alternative to shares and other types of investment. Added to this is the message from the Prime Minster that we need to get back to work, amid localised outbreaks of the virus (ironically within workplaces!) and a levelling-out of the contracting rate, which is not ideal. Add to this the dithering (deja-vu) in terms of deciding about mandatory wearing of facemasks and it is all still a bit of a mess (they said today that they are relying on people’s common sense apparently, good luck with that!).
Hence, the latter part of last week for me was more of a case of, if you’ve got nothing useful to say, say nothing!
On to this week and in spite of the above, the sharemarkets have opened up positively; to some extent this is due to a good US sharemarket on Friday, but also a round of hard decision-making within many larger firms as to their staffing levels going forward which, as I have previously mentioned, market investors like to see. But there is also the reality that business is getting back behind its desk, for better or worse right now.
Given that the last week saw little, if any, positive movement within investment markets (apart from Gold), there is arguably some room for positivity this week and beyond, but we do seem to be entering the second phase of the process (and still without a vaccine) and so focused ‘direction’ from above is more critical than ever, as is continued good behaviour (stop protesting and partying en-masse for goodness sake, now is not the time!).
So to the outlook, well it’s still a cautious one, as we learn more about the wider-ranging effects of this virus, but there does seem to be an unrelenting effort on the part of government to try and support the economy through this (even if some of the measures are less effective than others) and the investment markets very much recognise this and the benefit of being able to access funds at low rates of interest, so for now, it suggests that there is room for cautious optimism, even though it’s going to be a long road to recovery for the global economy as whole. We just need to contain the virus in this second phase it seems and that is what is possibly upon us right now, so the coming days and weeks are critical in this process.