Hello, and welcome to our latest client update, in another week which brought the usual mixture of good and bad news.
As usual, the stock market figures we quote below were correct at the close of business in the relevant market on Wednesday, while the commentary was written on Thursday morning and then revised after the Government’s daily briefing on Thursday evening.
The Latest News
As you will see below, the majority of stock markets we monitor for the update had a good week.
Perhaps the big story this week – especially if we look to the long-term – was one that went largely unreported. The US Senate has passed a bill which could lead to the de-listing of Chinese firms in the US. Meanwhile, trade tensions between China and Australia continue to escalate, as both sides accuse the other of insults.
There is unquestionably going to be a reckoning for this pandemic. We see no prospect at all of China handing over billions of dollars in ‘reparations,’ but the economic recovery could well be hampered by these simmering tensions, especially if they spill over into trade disputes and tariffs.
What of the week’s other bad news? Sadly, Rolls-Royce is cutting 9,000 jobs, and one in four US workers is now claiming unemployment benefit. Chancellor Rishi Sunak has said that the UK cannot count on an automatic ‘V-shaped’ recovery from the crisis, warning the country could face “a severe recession.”
And Marks and Spencer have cautioned us that, “shopping may never be the same again.” As we order more and more ‘online’, we think most of us had already worked that out.
Having dispensed his portion of gloom, Rishi Sunak told the Commons that two million self-employed people have applied for government grants because their businesses have been hit by Coronavirus. The scheme should ensure that money is paid to them within six days and will hopefully see them much better placed when the economy starts to recover.
More good news came with the suggestion that Nissan is considering moving production of two new Renault models from Spain to its plant at Sunderland.
If we said last week that it was ‘good news’ the UK economy had only shrunk by 2% in the first quarter, then it seems churlish not to award the same accolade to Germany, where GDP fell by just 2.2% in the first three months of the year.
Angela Merkel and French President Emmanuel Macron are proposing a €500bn (£449bn) European recovery fund, with the money distributed as grants to those EU countries worst affected by the pandemic. The German leader had previously been against grants, so this represents a shift in her position.
The Stock Markets
As we wrote in the last update, normally the vast majority of the stock markets we monitor for the update move in step – be that up or down. Last week was an exception to the rule, with six markets rising and seven falling.
We’re pleased to say that normal service has been resumed – and in the right direction. Nearly all the markets were up this week, with some turning in excellent performances as hopes for an economic recovery from the virus strengthened.
Three markets were up by 6% in the week to Wednesday. The Dow Jones index in the US was up to 24,576: Germany’s DAX index rose to 11,224 and the Russian stock market closed at 2,771.
Here in the UK, the FTSE-100 index rose 3% over the week to finish at 6,067. France and South Korea were up by the same percentage. China’s Shanghai Composite index was rather more subdued and was unchanged in percentage terms at 2,884. The one market to fall was in India, where the stock market was down 4% at 30,819.
The pound had a quiet week against the dollar, finishing the week very slightly up – but unchanged in percentage terms – at $1.2237.
Our Thoughts
Another week with the usual mixture of good and bad news comes to an end and whatever the ‘new normal’ looks like, certain things will be irrevocably changed.
We’re already seeing new companies and new products emerge in response to the crisis. Someone making face masks at their kitchen table will not replace 9,000 jobs lost at Rolls-Royce, nor will a device we saw this week, which allows you to open doors and press buttons without coming into contact with them. But we need optimism and perspective. Rolls-Royce was founded in 1906: lockdown started on March 23rd.
Your investments will have recovered some of the losses from earlier in the year – some may even be sitting on small 12 month profits. As we have written previously, we remain optimistic although cautiously so, as we feel the stock markets may have shown some undue optimism in recent weeks. Economies adapt and adopt new processes in reaction to change. The key to this is having sufficient redeployment of skill and retraining to embrace the very real opportunities that moving to a more sustainable economy can offer.
There is a real determination to recover from this crisis – not just in the UK but around the world. We will continue to keep you updated, and remember we are never more than a phone call or an email away should you have any questions.
And finally,
When lockdown started there was a sudden dearth of amusing stories. Fortunately, the resilience (and madness) of the human spirit seems to have re-asserted itself, not least among the many people who apparently can only do their daily exercise in fancy dress.
One gentleman in Cardiff perhaps took it a shade too far when he went out dressed as a medieval knight with a three foot sword. Armed police were duly called, and Sir Lockdown was forced to lay down his sword. He later apologised for “an error of judgement.”
Social distancing also made the ‘alternative’ news this week.
The managers at Café & Konditorei Rothe in Schwerin, north east Germany, politely requested that their customers wear swimming pool ‘noodle hats’ to ensure social distancing. Essentially, you can have a coffee, but you need to drink it wearing a hat with three large foam ‘arms’ on it.
Pride of place though, goes to a seafood bar called Fish Tales, in Ocean City, Maryland. A hat? Nothing so ridiculous: customers at Fish Tales must wear a giant, inflatable ‘spare tyre’ supported on wheels if they want to have a drink.
Go ahead and Google it. It’s not just shopping that may never be the same again…
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.