Month: April 2020

Weekly client update – Friday 24th April 2020

Welcome to our latest client update at the end of another week which brought the usual mixture of good and bad news, but which ended positively for the majority of world stock markets.

The stock market figures we quote were correct at the close of business (in the relevant market) on Wednesday evening, while the commentary was written on Thursday morning and then, as always, revised after the Government’s daily briefing on Thursday evening.

The Latest News

As we remarked last week, lockdown seems to have now settled to a regular mix of good and bad news. This last week was no exception.

The impact of the virus was clearly shown when China reported its first ever fall in GDP, with a drop of 6.8% in the first quarter of the year. As we reported last week, far worse is expected in the UK and other Western economies when the figures for the second quarter are revealed.

In the US, 4.4m more people became unemployed, taking the total number of jobless claims to over 26m. To give just one example, Disney stopped paying more than 100,000 workers.

It was also a bad week for the price of oil, which continued to drop dramatically as demand all but dried up. At one point, the price turned negative for the first time ever, as storage space around the world became full.

In the UK, there was the usual gloom on the high street as Top Shop and Miss Selfridge said they could close 100 shops. Chancellor Rishi Sunak was ‘not persuaded’ that the Government should guarantee 100% of loans to companies, despite widespread criticism of the number of businesses getting support from the banks.

Sunak did, though, extend his Coronavirus Loan Scheme to all financially viable UK businesses, allowing companies with a turnover in excess of £45m to apply for up to £25m of finance.

On Monday, the Government’s furlough site went live, with 1m UK employees being registered for the job retention scheme on the first day. This week also brought help for start-ups, as the Treasury announced £1.25bn ‘to protect firms driving innovation in the UK.’ This comprised a £500m loan scheme for ‘high growth firms’ and £750m for SMEs focused on research and development.

Cheaper clothes and fuel saw UK inflation drop to 1.5% and, proving the old ‘it’s an ill wind’ adage, US giant Netflix revealed that they had added 16m new subscribers in the current crisis.

The Stock Markets

Like the previous week, the week just ended was a much more ‘sensible’ one on the world’s stock markets, with all the major markets once again moving in a relatively narrow range. Fortunately, for most markets that movement was upwards.

Three markets led the way, rising by 3% in the week to Wednesday evening. Those were the Russian and Indian markets, and the UK’s FTSE-100 index of leading shares, which closed at 5,771. The FTSE is up by more than 13% since the gloomy days of mid-March when the full impact of Covid-19 was just being appreciated and Chancellor Rishi Sunak was introducing the first of his measures to support the economy.

In Europe, the French and German stock markets both rose by 1% in the week, and China’s Shanghai Composite was up by a similar amount. The US Dow Jones fell just 24 points in the week, leaving it unchanged in percentage terms at 23,476.

The only major markets to record falls were Hong Kong – down 1% to 23,894 – and Japan’s Nikkei Dow, which dropped 2% to finish Wednesday at 19,138.

The pound was down against the dollar in the week, falling 2% to trade at $1.2313.

Our Thoughts

Several of Thursday morning’s papers picked up on the ‘light at the end of the tunnel’ theme. However, many of them also reported that some form of social distancing may have to stay in force for the remainder of this year. In Germany, wearing masks is now compulsory on public transport, with most states also making masks mandatory while shopping.

That’s going to mean more good news for Amazon and more bad news for the high street and we’d suggest that we are now going to see a world gradually adapting to living with the virus as all countries race to develop a vaccine.

Like every business, we will need to adapt to the ‘new normal’: in the short to medium term that will certainly mean doing more business remotely, using technology like Zoom and Skype. But, we will emphatically still be here to answer your questions and help you cope with the changing circumstances.

One thing the ‘new normal’ will demand is more – and better – communication with clients. We will never fail you on that score and we’ll be with you every step of the way as the economy gradually recovers.

Weekly client update – Friday 17th April 2020

Welcome to our latest client update.

With the quietest Easter any of us can remember out of the way, we’re back to normal for the update this week. That means the stock market figures quoted were accurate as at close of business on Wednesday, with these notes written on Thursday and then revised after the Government’s daily briefing on Thursday evening.

The latest news

This ‘week’ – given that we wrote our last update a day early – has seen its fair share of winners and losers. Let’s go quickly through them…

In the US, Bernie Sanders conceded defeat in the race for the Democratic nomination, meaning that November’s Presidential election will almost certainly be between Donald Trump and Joe Biden.

In the UK, the high street had another bad week as figures for March confirmed that retail footfall had fallen to its lowest level on record, and clothing chains Oasis and Warehouse went into administration, putting more than 2,000 jobs at risk.

It also looks like it will be a bad week for growth in China. The country’s GDP figures for the first quarter of the year will be published as this update reaches you. The consensus is that GDP will have fallen by 6.5% in the first quarter, but some forecasters are suggesting the fall could be as much as 10%.

Sadly, that pales into insignificance compared to the forecasts for the UK economy in the second quarter. Chancellor Rishi Sunak has reportedly told Cabinet colleagues that growth could fall by as much as 30% between April and June. Newspaper headlines went further, variously suggesting a 35% drop in GDP, two million people losing their jobs and – according to the Telegraph – Britain ‘facing the biggest economic shock in 300 years.’

What about the week’s winners?

Thanks to another stimulus package from the Federal Reserve, US shares were at one point enjoying their biggest weekly gain in 46 years. As we report below, the Dow Jones index had an excellent week.

Inevitably, it was another good week for Amazon unless you work in their HR department. Having hired an extra 100,000 staff last month, they added another 75,000 as demand for deliveries continued to increase.

There has also been an upsurge in online gaming, as increasing numbers of people have switched to playing and watching e-sports. Covid-19 will undoubtedly speed up changes to the UK high street. Could it do the same to the way we play and watch sport?

The stock markets

After the fluctuations of the last few weeks, this was a much more subdued week on world stock markets, with most of them moving in a narrow range. The US led the way up, rising by 4% to 23,504. The worst performer was the Russian market, which dropped 5% to 2,499 as the Covid-19 virus took a much stronger hold in the country.

China’s Shanghai Composite index was unchanged in percentage terms despite widespread warnings about Asian growth this year, while the UK’s FTSE-100 index fell by 2% to 5,598. Pride of place probably goes to the Greek market, which dozed peacefully through Easter, starting the week at 608 and ending it at 608.

The pound had a good week against the dollar, rising by 2% since our last update to close on Wednesday evening at $1.2544.

Our thoughts

This last week has seen the usual mix of good and bad news. As we’ve mentioned above, Rishi Sunak gave a stark warning to his Cabinet colleagues. With Dominic Raab confirming another three weeks of lockdown on Thursday evening, it seems inevitable that the UK’s growth will be sharply down in the second quarter of the year. The Chancellor has, however, been equally adamant that the UK, which had a strong economy before the pandemic struck – will bounce back quickly.

By the same token, the International Monetary Fund has predicted a ‘deep recession’ – but was equally quick to say that global economies will bounce back. Those are views that we share.

Yes, there is going to be some short term pain and, as the Chancellor has said, he cannot protect every job and every business. But we remain convinced that world trade and global economies will recover – and they may well recover more quickly than the generally accepted wisdom currently has it.

Finally, like the rest of the country, we must applaud Captain Tom Moore.

Captain Tom has been doing laps of his garden. He’s 99 and wanted to do 100 laps before his 100th birthday at the end of this month. Tom’s original aim was to raise £1,000 for NHS charities. So far he’s raised nearly £15m, with donations coming from 53 countries. In the time it has taken us to write this update, Tom has raised £500,000. Like the rest of the country, sir, we salute you.

Weekly client update – 9th April 2020…

Hello, and welcome to our latest weekly client update.

It would be easy to forget that it’s Easter this weekend. It is – and that means we have brought this week’s update forward by a day. The stock market figures quoted were accurate as at close of business on Tuesday, and the update was written on Wednesday morning and revised after the Government’s briefing on Wednesday afternoon.

The latest news

Last week, we reported that the Prime Minister had tested positive for Covid-19 and was in self-isolation. As everyone will now know, his condition has deteriorated and, as we write this, he has spent his second night in intensive care. As we do with everyone suffering from this dreadful virus, we send him our very best wishes for a speedy recovery.

In the interim, Dominic Raab is standing in for him but, as expected, Wednesday’s briefing saw Chancellor Rishi Sunak fielding the tough questions, after it emerged that the banks had approved only 0.65% of applications for the Business Interruption Loan Scheme.

On the high street, this week saw Debenhams call in the receivers and New Look simply refuse to pay its creditors, instead inviting them to come and take their stock back. Some high streets are going to look very different when this crisis is over.

Global airlines warned of 25m job losses and the French Finance Minister warned the country was facing its worst downturn since World War II.

More optimistically, the rate of infection in Spain and Italy does appear to be easing slightly, and Europe is starting to look at a staggered relaxation of the current lockdown restrictions. There was also good economic news from Germany, which we report on below.

The stock markets

Last week saw most leading stock markets fall. This week – or in the six days since our last client update – they have all moved resolutely in the right direction.

The German DAX index led the way, rising by 9% to 10,357, boosted by news that factory orders had only fallen by 1.4% – much better than the analysts’ predictions of 2.4%.

In the US, the Dow Jones index was up by 8%, while at home the FTSE 100 index of leading shares rose 5% to 5,704. The markets in France, Hong Kong and Japan all rose by a similar amount.

South Korea was the best performer in the Far East, with the market up 8% to 1,824 while China’s Shanghai Composite rose 3% to 2,821.

Finally, the pound started the week trading at $1.2378 and ended it at $1.2344 – unchanged in percentage terms.

Our thoughts

If you are writing a monthly or quarterly review of the news and stock markets, you have a longer timeframe and – almost by definition – a more balanced mix of good and bad news. Writing every week you’re much more at the mercy of events and – as we have commented above – this was a week when there was certainly some bad news, especially if your glass is by nature half empty.

Despite that, world stock markets had a good week. There seems to be a growing realisation that doing ‘whatever it takes’ cannot include crashing the world economy, and stock markets responded rapidly to the news from Germany and the possible easing of lockdowns in Europe. 

As we wrote previously, we are certain that when Covid-19 is defeated – as it will be – there will be a real sense of optimism and a determination to rebuild as quickly as possible.

As usual please contact me if you have any questions…

Weekly Client Update – 27th March 2020…

Welcome to our second Client Update of the current crisis. As was the case last week, this update was written on Wednesday and Thursday, with the stock market figures quoted correct as at close of business on Wednesday, and the news and opinions completed on Thursday evening, after listening to the Chancellor outline his plans to help the self-employed. As expected, they will be paid 80% of their average earnings over the last three years to a maximum of £2,500 a month.

The latest news

When he was Prime Minister, Harold Wilson famously said that “a week is a long time in politics.” If it’s a long time in politics, then in the current climate a week seems like an eternity.

In the UK, we may not be living under quite the same lockdown conditions as France or Italy, but this week saw the Government pass the Coronavirus Act, giving itself unprecedented peacetime powers. Schools are now closed, all but essential shops have been ordered to close (many people will have been pleased to see off-licences added to the list of those that can remain open…) and the majority of us are making the most of the one period of exercise allowed to us each day.

The rules on social distancing seem to be gradually becoming understood and both industry and the public have rallied to Boris Johnson’s call for help. As we write this, the Government has ordered 10,000 ventilators from the Dyson company and more than 500,000 people volunteered to help the NHS in one day.

In Europe, Spain has sadly joined Italy in passing the death toll recorded by China and the number of cases in the US is increasing rapidly. By Friday morning, it had more confirmed cases than any other country. Earlier in the week, the US government passed a near $2tn (£1.67tn) aid package for business and the US economy, described by one US Senator as a “wartime level of investment in the economy.”

The stock markets

The rumours of this US aid package had buoyed world stock markets even before it was actually announced. The markets are still down for the month as a whole and for the year to date. But perhaps this was the week we saw some light at the end of the tunnel as far as stock markets are concerned.

The only major world market that did not rise in the week was India, which fell by 1% as 1.3bn people went into lockdown.

Most markets enjoyed double digit gains, with France leading the way. The stock market there was up by 18% in the week to 4,432. The German and Japanese markets both rose by 17%, while the US Dow Jones index was up 7% to 21,201. China’s Shanghai Composite Index – which as we noted last week has proved relatively resilient to the pandemic – rose just 2% to 2,782.

In the UK, the FTSE 100 index of leading shares was up 12% in the week, rising from 5,080 to 5,688. The pound rose by 2% against the dollar during the week, closing Wednesday at $1.1865.

Our thoughts

Despite the rise in stock markets this week it is easy to look at the above figures and start to worry. Let us make two points. First of all many of our clients have very diversified portfolios: the falls in the FTSE, for example, will not necessarily be mirrored in the value of your savings and investments.

Secondly, world stock markets have historically always recovered in the long run. Clearly we cannot give specific financial planning advice in this update, but it is worth noting that whether it was Black Monday in 1987 or the financial crash of 2008, markets recovered over time.

We ended last week by writing: ‘We’re certain that when this is over there will be a renewed spirit of optimism and a determination to rebuild as quickly as possible.’

We think you saw that this week, whether it was industry’s rapid response to the need for ventilators, the huge numbers volunteering to help the NHS or the response of stock markets to the US stimulus.

We will send you another update next Friday. Until then, stay safe, stay well, and remember that we are always here to answer your questions. We may be working from home, but we are never more than a phone call or an email away.

Weekly client update – 3rd April 2020…

Hello, and welcome to our latest weekly client update. As previously, the update was written on Thursday (and revised after the Government’s daily briefing) with the quoted stock market figures correct as at close of business on Wednesday. Please note that next week we will bring everything forward by a day to allow us to send the update out before what we’ll optimistically call the ‘Easter break’.

The latest news

It hardly counts as ‘latest’ news, such is the pace of change, but the last seven days saw the Prime Minister, Health Secretary and Chief Medical Officer all test positive for Covid-19. Speaking from isolation, Boris Johnson said that ‘things will get worse before they get better’ and it currently seems that the rate of infection in the UK is doubling every 3-4 days.

Health Secretary Matt Hancock did return to work – and to the daily news updates – on Thursday, and has committed to 100,000 tests per day by the end of April.

Our last update outlined the measures central banks and governments around the world were taking to combat the pandemic but, as UK Chancellor Rishi Sunak said, governments will not be able to ‘protect every company and every job.’

By the time this is eventually over, some household names will have ceased to exist and – if the queue for bailouts is any guide – many of them will be in the airline industry. Virgin Atlantic will be asking the UK government for help and, in the US, American Airlines says it needs $12bn (£9.67bn).

Meanwhile, the number seeking unemployment benefits has risen sharply: nearly 1m people have applied for universal credit in the UK in the last two weeks. In the US, it was reported on Thursday afternoon that the number claiming unemployment benefit had surged to over 6m.

The stock markets

Most of the major world stock markets have fallen over the last week, as the ‘bounce’ from the stimulus packages introduced by the various governments wears off. The UK’s FTSE 100 index of leading shares was down by 4% and this was typical of the falls seen on the major European markets. The US Dow Jones index was down by just 1% while China’s Shanghai Composite index fell by 2% as factory activity in the country reportedly jumped back to pre-pandemic levels.

The one exception to the falls was the Russian market, which rose by 1% in the week. The pound also enjoyed a good week against the dollar, and was up by 4% to $1.2378.

Our thoughts

It would be easy to see the news from this week as wholly negative: stock markets down, the numbers of companies seeking bailouts and the number claiming unemployment benefits both up. But that was always going to happen, given the measures that have had to be taken to combat the virus.

And there have been some good news stories this week, reinforcing our view that when the virus is over, the recovery may be quicker than many people are currently predicting.

As we noted above, Chinese factory output is already back to pre-crisis levels. In the US, President Trump has said that, “With interest rates for the United States being at zero, this is the time to invest in our decades long awaited Infrastructure Bill.”

And while stock markets may be down this week, we have not seen the wild fluctuations that we saw in previous weeks. All the major world markets, with the exception of India, remain higher than they were two weeks ago.

As usual, please stay safe, stay well, and remember that we are always here to answer your questions. We may be working from home, but we are never more than a phone call or an email away.