Weekly client update – 5th June 2020

Welcome to our latest client update – apologies, Friday turned out to be a busy day - so a bit delayed in delivery. It has been a turbulent week, as protests in America over the death of George Floyd spread around the world. It ended with more tension between the US and China as the US announced it would ban passenger flights from China from the middle of the month.

Despite all this, world stock markets enjoyed an excellent week, as we report below. As always, the stock market figures quoted were correct at close of business in the relevant market on Wednesday, with the commentary written on Thursday morning and revised after the Government’s briefing in the evening.

The Latest News

Let’s begin in the car industry, with the news that the UK manufactured just 197 cars in April. However, the UK governments discouragement of public transport use and reopening, in England, of car showrooms may lead to growth in demand. Nissan closed its factory in Spain, amid strong rumours of the production of two models being moved to Sunderland.

Renault announced that it would be cutting 15,000 jobs around the world and in the Far East, two major banks – HSBC and Standard Chartered – said that they would support China’s new security law in Hong Kong.

Chancellor Rishi Sunak confirmed that the furlough scheme would continue until October, and there was also a second pay-out for the self-employed as he continued his delicate balancing act of supporting jobs and the economy – but also keeping the overall cost of the support under control.

With more than a quarter of UK workers now furloughed, we wait to see what the long term impact on jobs is, as government support is reduced and employers have to pick up more of the cost. There is talk of initiatives on job creation from the Government, most likely the infrastructure issues proposed during the election - but what a great opportunity for a ‘Green New Deal’. Whatever the proposals, expect this to be followed by a fiscal statement from the Chancellor early in July.

The week ended with the UK Government announcing that anyone arriving in the UK would face a 14-day quarantine period, a move widely condemned by both the travel industry and business groups. Portugal announced that UK holidaymakers would be “most welcome” with the Portuguese foreign minister expecting an ‘air bridge’ to be in place by the end of June. Let’s hope that a week in Faro does not mean two weeks in isolation when you return…

What of news away from the UK? As we mentioned in the introduction, this has not been the best of weeks for the United States. There has now been a week of protests in the wake of George Floyds death, rising numbers of Coronavirus cases and tensions with China continue as the clock ticks down to November’s Presidential election.

The Stock Markets

Italy has long been seen as one of the countries most vulnerable to a prolonged economic downturn. There was little sign of that in the week just ended, as the Milan stock market rose an impressive 10% to 19,642. The Indian market also recovered from some recent falls, rising 8% to 34,110.

Among the more mainstream markets, the German DAX index rose 7% to close Wednesday at 12,487. Both the US and Chinese stock markets were up by 3% - the only time the two countries were in step all week, with the Dow Jones finishing at 26,270 and the Shanghai Composite at 2,923. The Hong Kong market was also up, rising 4% to 24,326.

At home, the FTSE-100 index also had an excellent week, closing Wednesday up 4% at 6,382. The pound was also up against the dollar during the week, rising 3% to end at $1.2588. 

Our thoughts

We believe that economies and markets around the world will recover from this crisis, and there was plenty to support that view this week.

In China, e-commerce giant Alibaba said it has seen a ‘steady recovery’ since March, with strong demand for groceries, electronic products and cloud computing. In the UK, Oxford Economics is predicting a strong economic recovery in the second half of the year.

But is there any historical precedent to suggest that we will see a ‘strong recovery’ once the pandemic is over? In the 14th Century, the Black Death ravaged Europe and, as an article in City AM pointed out this week, there are some remarkable similarities between that pandemic and the current one. For more on this, click here

Clearly, world stock markets shared our views this week, but our concerns are about what that recovery will bring. This week’s news agenda, which swung firmly away for coronavirus, suggest why this should be a concern.  We see global outrage over racism and lack of opportunity based on ethnicity, we see China restricting human rights in Hong Kong and corporates acquiescing, and we see the growing urgency in the drive to bring back ‘business as normal’, presented in the form of support for motor trade, gambling industry (under the guise of ‘bringing back sport’) and retail.

We’ve had our votes for now – so there is little we can do immediately in term of the political landscape our economies operate in. It is therefore a continuing reassurance to me, that my money has a voice and that there is a growing interest in managing money with regards to environment, social and governance (ESG) issues. Only this week, we received notification from one of the investment houses outlining the ‘engagement’ issues that they will be challenging businesses on over the next 12 months. This agenda includes topics such as Gender & Diversity, Fast fashion, Living Wage and engaging towards zero deforestation.

Sometimes this as small steps to nudge corporate behaviour and sometimes quite concerted collaborative efforts. Whichever, I’m glad that my money ‘talks’ and has a policy of trying to make a positive impact on our world and our futures.

As we say, “make your money change your world”

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