Today, March 23rd, marks one year since the first national lockdown.
For us at Ethical Futures, that was a time of scurrying around to secure enough laptops to support our staff, who by that time had already moved to working from home. With contagion of the virus rising and stock markets plunging it was a worrying time for all and we hope that our newsletters and communications over this time has helped to give you peace of mind.
Covid and your money
Certainly, from an investment perspective, the effects of the Covid crash were short lived. Markets soon came to realise that this was an event driven incident not a systemic risk such as we had experienced in 2008. That led to a fairly rapid recovery as can be seen from the blue line in the chart. This recovery was led by activity focussed on the pandemic, with companies active in healthcare, diagnostics, safety, information technology and data management faring well. So too it has to be said, did video streaming businesses and the ubiquitous Amazon, who sated the unquenchable need to shop.
Note that I said ‘investment’ above. For those with ‘savings’ in the bank or building society, the story has been very different and is likely to stay so for the foreseeable future. Driven by the perceived need to support homeowners and businesses with lower borrowing costs, the Bank of England slashed their lending rate to a historic low of 0.1%. This has filtered through to a progressive reduction of savings rates over the past year, with rates of 0.001% not uncommon and 0.5% being a really good deal. It is possible to get a rate slightly above inflation if you lock up for a year but for how long that remains feasible is questionable.
Context is important though, especially when considering cash returns. As well as falling rates, the marked fall in economic activity has led to all time low inflation too – averaging at 0.7% for the 12 months to Jan 21. Therefore, if you can secure a rate around 0.75% then you will have maintained purchasing power. Inflation though is likely to spike and rise over the next year due to the significant savings that those who have kept a job during Covid have made, due to an enforced low consumption lifestyle and are now likely to ‘splurge’.
Building Back Better
With a mild spring, empty streets and enforced free time (for some) there was an engagement in new pursuits and a heady optimism about possibilities of lower carbon alternative lifestyles and ‘building back better’. As we now know, human behaviour doesn’t change that radically and it seems likely that as soon as restrictions lift there will be busy airports, probably even more cars on the road, crowded bars and yes, for some, even the return of the commute. We have seen that the impacts of the coronavirus have disproportionately affected the elderly and infirm, the poor and socially disadvantaged and consequently increased the numbers living in a precarious lifestyle. Despite the recent ruling that Uber drivers should be treated as employees – there is a clear shift to a gig economy and automation.
Aspects of how an economy as it restructures and how towns and cities re-adjust to new norms are really tasks for governments rather than investment funds, but the managers who manage your money do take these concerns on board. That might be simply by deciding not to invest in businesses with limited economic future or questionable labour standards or by actively engaging with management to address issues such as increased interest in remote working or issues such as modern slavery that drive some of the precarity of modern workplace.
On a more positive note, we can see that investment managers are reacting to the potential of a post Covid world and that their investments reflect this. Most obvious would be the investment in technology due to the ubiquitous Teams or Zoom, that do offer a real opportunity for people to work remotely and cut short haul travel. Many of the themes link closely to climate change – looking not only at renewable energy but also how it is managed, transmitted and conserved. Interestingly, much of the development around electric cars and transport, centres not just on them as a mode of transport but also their ability to act as a communal energy ‘reserve tank’. What is good to know, is that over the last couple of years, there has been a significant growth in awareness of Environmental, Social and Governance factors in making investment decisions.
The route out of lockdown for Ethical Futures
Our Covid experience has been a busy and learning one. We have continued to experience rising demand and the ability to work digitally means that interest is now coming from all over the UK. We have experienced the ‘pros’ and ‘cons’ of remote working and are still working on improving our processes to fit with a more digital working environment. Ironically, to do that – it would be nice to get everyone together in one room to talk it through!
We are proud to say that all our staff have been fully employed (at full pay + a homeworking allowance) throughout Covid. Due to increased demand for our services, we have extended some hours and even carried out a virtual recruitment process for our intern, Marian, who has secured a short term post with us to help with client communications.
We have no crystal ball but prefer to err on the side of caution. For that reason, we remain working remotely with just a weekly mail pick-up. We shall monitor government advice and expect that we shall try a phased return for some staff to the office in the late spring – however, it is likely that we shall be reviewing terms and offering flexibility around home working for those who are interested. For clients, I expect that we shall continue to operate on a remote basis for some time and we don’t envisage face to face meetings until mid-summer or later (assuming vaccination programmes continue at the current pace).
We thank you for your continued support – stay safe.
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.