This week, we saw the FTSE 100 fall over 5% from its 6,100 peak on Thursday, before stabilising and calming just under the 6,000 mark at the point of writing this article.
My clients will know by now that I crave ‘calm markets’. The extreme volatility of March and April were a sign of the underlying battle occurring between panicked traders on the one side and massive Central Bank stimulus on the other.
At that time, I noticed JP Morgan Investment representatives popping up on Bloomberg and other programmes. They grimly predicted a long and protracted economic downturn that could take markets many years to recover from. I like JP Morgan, but I didn’t agree with them on this point.
Interestingly, JP Morgan came out with a statement in an adviser communication this week which basically admitted they might have overcooked their negative predictions. They said this: ‘We acknowledge that the unprecedented policy response – particularly the willingness of central banks to intervene in credit markets – has shifted the balance of risks’.
The bold and coherent moves by Central Banks to pump massive levels of liquidity into the markets turned the situation around last month. Markets are now calming down as they realise that the world isn’t about to end.
My view (perhaps simplistically) is that millions of people have been unable to spend into the global economy for the past few months. We appear to be some way off a return to ‘business as usual’, but when that comes, I believe we will see a strong ‘snap back’ that leaves the pessimists scratching their heads as to why they sat out of the market.
The picture isn’t all rosy, however. The Bank of England said yesterday that they expect a 14% fall in our GDP this year and countries such as France and the US are already reporting GDP falls of around 5% for the first quarter of this year. Their economies weren’t even locked down for all of this quarter.
Unemployment claims hit 30 million in the US this week, this is a staggering 18% of their workforce. This causes Mr Trump a serious headache as he considers his own re-election ambitions towards the end of this year.
Now we might start to see a gloomy onslaught of predicted ‘recession’ headlines in the coming weeks. A recession is simply the term used to describe two consecutive quarters of negative GDP. It doesn’t take a rocket scientist to work out that a locked down economy over two quarters will earn the label of ‘recession’.
The headline that has been missed this week, is the prediction from the Bank of England that the UK economy could grow by around 15% in 2021 and be back to pre-virus levels by just the middle of next year.
This is music to the ears of our clients who all take a longer term view in regards to their investment portfolios, and I genuinely believe that we are now seeing far more data to help us map our way through the next 18 months of recovery together.
In other news, we have had a productive conversation with Old Mutual about their addiction to communication! We have raised our clients concerns that the needless amounts of envelopes and thick paper bombarding their letter boxes is becoming wearing. Old Mutual have been very unfortunate in the timing of this lock-down as they had already launched their new platform prior to having to send their staff home. This makes it incredibly hard for them to correct problems such as the automated letters and emails you will be receiving. They have shared some positive developments with us and I am hopeful that they will manage to reduce the communication overload soon.
In the meantime, please let us know if you would like any help signing up to online access to reduce the amount of post coming through your door.
This week I feel it has been a case of ‘no news is good news’. The Vaccine trials continue at pace, countries like Germany and South Korea are getting back to work in earnest and this glorious weather has continued.
We have never seen so much interest in our Ethical portfolios, as more and more clients consider how different our skies and sea look and how rapidly our wildlife is coming back.
Next week I shall be teaching over 400 Financial Advisers – via a webinar training session – who want to know more about how we construct Ethical portfolios. For many years, Thomas and Thomas has been recognised as leading the way in our profession. It feels good to remain at the front of the pack.
Until next Friday, remember that we are here for you 100%, nothing is too much trouble.
My very best wishes as ever.
Darren
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