Apart from the weather, I have been struggling to think what to write about today; not because there isn’t much going on, but because things within the investment world have not really changed much in recent days, up one day, down the next, but tentatively creeping forward over time.
Is this a sign of things stabilising, or is it a sign of trepidation as markets await the next phase? Well I think it may be a bit of both.
We hope that, as countries start to return to work, the worst of the situation is behind us (nothwithstanding a second spike of the virus), but there are limitations; limitations as to the way in which retail businesses can serve their customers and limitations in terms of delivery and stock logistics. Quick question, do you enjoy the present process for shopping for goods, or is it something that is making you think twice about whether to bother or not?
I have spoken previously about gauging people’s appetite for goods and services after lockdown and I think we are now entering the ‘testing’ phase of this exercise, the part where some businesses decide whether the current market is one which is viable for them or not. Financially well-resourced businesses can trade through this, but given that around 45% of UK businesses only have between 1 and 2 months’ cashflow, for many it may be just too difficult, especially if their customers do not return apace.
I am sure that we will see many of the larger businesses expanding further, as they acquire more market-share and Amazon is a prime example of this (pardon the pun!); but what will be interesting, is gauging where we stand in terms of footfall in the future; have people’s habits have been changed, will more people now use mail order and home delivery shopping for goods? I think so, especially if people have to continue to queue and distance themselves from others.
So what about investment markets? Well in terms of sharemarkets, opportunities will abound within certain sectors, but stock selection will change, as analysts’ weigh up which businesses are better-structured for the new world (for however long this lasts!).
For the more cautious investment sectors we may see a change in the likes of property investment funds, as businesses perhaps look to move towards home-working (more pandemic-proof and less cost maybe, although not as efficient as we have seen); although I see warehousing being in even more demand than previously, as firms stockpile against a second spike of the virus and learn from this whole ‘exercise.’
Then there are the lower-risk governmental and corporate bond sectors of investment, which I talked about in more detail in a previous blog. These are holding up well, but the flip side of all of this borrowing is that, with the level of governmental debt now being so high as a result of the lockdown and, with interest rates being so low, added to the fact that tax revenue this year is bound to be much lower, I can see an increase to our taxes on the horizon. Maybe lockdown has helped us to appreciate that we can manage on a little less each week if we have to, something which I am sure that the government won’t have missed seeing also.
But probably the biggest thing for now, is the need for a stable and consistent path to recovery and if we have this we will be fine. However we are sure to find a few potholes along the way whatever happens, as there is still that Brexit thing going on somewhere in the background.
I will try my best to give you whatever insight I can as we move forward and, above all else, if you are at all worried about your investment or financial situation, please let me know. I’m here and suitably socially-distanced and, in spite of the doom and gloom we read and listen to each day, there is a reasonable recovery going on within the investment side of things (not wishing to tempt providence!) and I’m armed with a lot more information than I would want to bore you with on here (well I’m honest!)!