Weekly client update – 1st May 2020

Hello, and welcome to our latest client update, from a week that brought us a new son for the Prime Minister and his partner, a promotion for Captain Tom and rising stock markets around the world. 

As usual, the stock market figures quoted in this update were correct at the close of business in the relevant market on Wednesday. The commentary was written on Thursday morning, and then revised after the Prime Minister’s briefing on Thursday evening, when he offered the optimistic view that the UK was “past the peak and on the downward slope.” Next week, we will hopefully be reporting on the Government’s plan to “get the UK back to work.” 

The Latest News 

Last week it was China, this week it was the turn of the US to report an economic downturn in the first quarter of the year. As the country recorded 1m confirmed cases of Coronavirus, figures showed that the economy had contracted by 4.8% in the first three months of the year. This was the worst performance since 2008 and ended a run of expansion going back to 2014. 

There was more bad news for the US on Thursday afternoon when the latest unemployment figures showed that more than 30 million Americans have lost their jobs since mid-March. 

You may have heard economic commentators talking about something called the Purchasing Managers’ Index. It is, simply put, a numerical measure of business confidence in a country, with any figure above 50 indicating optimism and anything below 50 meaning that businesses are pessimistic. You won’t be surprised to hear that the figures recorded in April were the lowest ever – 12.9 in the UK and 13.5 in Europe. 

But in many ways, those figures – like the GDP fall in the US and the similar figures that will surely follow from the UK – are yesterday’s news. The emphasis now is on the recovery as many European countries start to gradually ease the restrictions of lockdown and, in the UK, Chancellor Rishi Sunak finally bowed to pressure to help small firms. 

Small and medium sized companies will now be able to obtain loans of up to £50,000 which will be 100% guaranteed by the Government. These ‘bounce back’ loans will be a lifeline for many small companies and should mean that far more firms survive the pandemic than might otherwise have been the case. 

The Stock Markets 

Almost without exception this was a good week for world stock markets, with several of them making significant gains as a top US infectious disease expert said the early results of a drug being developed by Gilead Sciences were “quite good news.” 

Among major markets, Germany’s DAX index led the way, rising by 7% to 11,108. The UK’s FTSE 100 index was up by 6% to 6,115 and in the US, the Dow Jones was up 5% to 24,634. 

The only major market to fall was China’s Shanghai Composite, which was down 1% to 2,822, but the other major markets in the Far East – Japan, Hong Kong and South Korea – all rose by 3%.

The pound was up by 1% in the week and, on Wednesday evening, was trading at $1.2447. 

However, it would be our expectation that global markets will remain volatile in the short term, rising on the ‘good news’ as mentioned above but falling on ‘bad news’ with ongoing stories of the impact that the pandemic has had on specific companies around the world.  Thus is the nature of any global recession and recovery and reaffirms the importance of not trying to second guess the markets on a week by week basis.    

Our Thoughts 

We mentioned the phrase ‘new normal’ last week and they suddenly seem to be the words on everyone’s lips. Unquestionably the world is going to look very different when we finally emerge from this pandemic. 

This morning, the boss of Barclays has said that “big, expensive offices may become a thing of the past” and – with the Times reporting that we’ll need to be at the airport four hours before a flight as medical screening is added to security, far more of us may choose to work at home and holiday in the UK. 

We won’t know the full effects of the virus until some time after we have finally beaten it. Many household name businesses will have disappeared. Many business owners – especially those close to retirement – will decide that the game is no longer worth the candle. But new businesses will emerge, finding new ways of working and delivering new products to new markets. 

We remain optimistic – and this week that optimism was shared by the world’s stock markets. Saving and investing remains a long term commitment: Coronavirus may have brought that into sharp relief, but the fundamentals do not change. Neither does our commitment to give you the very best financial planning advice. 

Whatever your views on this week’s news, there has been the usual slew of offbeat stories to lighten the mood. Pride of place though, must go to Captain Tom Moore or, as we must now learn to call him, Colonel Tom Moore. He celebrates his 100th birthday as we write and has so far raised a quite staggering £31m for the NHS. Never was a promotion more richly deserved. 

Let us finish this week with news of a company that is doing well during lockdown. That company is fashion retailer Boohoo, where, perhaps unsurprisingly, sales of tops have increased because, “everyone wants to look smart on Zoom calls.”