Well, it’s yet another gloriously sunny day at the start of what is sure to be a defining week in terms of lockdown activity and decision-making (even if the rest of us are still stuck at home)
Today signals not only the opening of the application process for employers to claim furloughed salary benefits for their workforces, but also a return to parliament for our MPs’ (Did you miss them?)
So what does this mean for the UK, apart from the obvious importance of getting funds to businesses before it becomes too late for many and, of course, the resumption of the blame game across the benches of the House of Commons (adequately socially-distanced this time I hope)? Well perhaps a little more insight into the reality of where we actually are for a start, as nothing seems more certain than everything being uncertain lately.
What is clear is that both America and the UK will be very closely watching what happens within some of the European countries who are starting to relax elements of their lockdown and, within America (more particularly New York) there is to be a ramping up of testing, in order to try and reveal the full extent of who has and has not caught the Covid19 virus; the results will be very interesting to see (I’m sure they will publish them, come what may!).
In terms of where that leads us in the investment cycle, I expect there to be a degree of continuing uncertainty however, as institutions try to predict the longer term impact of economic recovery from the lockdown and, although a lot of this uncertainty has already been factored into investment valuations, the future path and shape of the economy still remains unclear. I’m sure people will want to reward themselves as a consequence of being free to function as normal again and this consumer-spending will help many areas, but perhaps it will stop short of purchasing a new car, or a new home, just yet. So what does this mean for the car manufacturing sector and of course property valuations? Expect a slow and stuttering return to any semblance of what was normality, as the financial impact to both businesses and government is properly assessed and businesses examine consumer appetites for their offerings in the months ahead.
What has been different (and more encouraging) in all of this so far, when compared with previous financial crises’, has been the government’s financial support package to businesses/employers (albeit the end product has not been very forthcoming as yet). The real test will be when this is withdrawn, possibly from June this year, and businesses’ are left to fend for themselves in a potentially new marketplace. Hopefully it will be a soft landing.
Whilst sharemarkets will continue to reflect some of this uncertainty perhaps, the lower-risk investment sectors have already been building their own safety nets into their offerings, with corporate bond funds making bigger contingencies for default in their loans to businesses, some as high as 50%, which is previously unseen! This is a good thing for yourselves as investors in more cautious areas, as it ensures that, if companies do fail, then the impact of this is lessened on the investor, but if the outcomes are better than provided for (let’s hope so, for all the right reasons!), then this will be a positive growth factor for these type of investment sectors.
Heavy stuff for a sunny Monday, but to summarise, I see this as a defining week on many fronts and, if managed correctly and with the right outcomes in terms of ongoing virus controls (and of course PPE supply and testing processes), we may start to really see a light at the end of this tunnel in the days’ ahead.
I am very much open for business as usual and whilst I cannot say quite the same for many providers, I am getting things done and if there is anything at all that you need, or wish to discuss, please let me know!