It seems in some ways that we have not come very far since last week, even though lockdown measures are being eased slowly and we continue to see small steps with improving numbers of Covid 19 cases, we still have many uncertainties including how future travel plans may be possible.
For the UK, the key to this I believe, will be the success of the NHS Test & Trace initiative, which is in its early stages still. I therefore thought the following information and link may be of some use if you are unsure how this is supposed to work.
You’ve probably already heard in the news that government have now launched their NHS Test and Trace service, aimed at helping reduce the spread of coronavirus and save lives.
Click here to find out:
As I understand it, non essential shops in the UK are being allowed to open from next week but much to Chris’s chagrin, hairdressers are still not on the list – mind you, I am in desperate need of a haircut myself!
Turning now to the financial world, we work with a number of different fund managers and I thought to add a little variety to our news and views, that I would invite one of them to make a contribution each week so that we can capture the thoughts of some of the people who are at the coal face of investment management. I have asked them to avoid using jargon as far as possible, but some will inevitably creep in!
This week, I have invited Hugo Pring who is a partner and Senior Investment Manager at Lunesdale who are part of the Raymond James Group and just for a bit of fun, I have included a photo of him looking rather quizzical!
Financial markets have been just a little bit excitable over recent weeks - including a couple of the major U.S. markets returning to positive year-to-date performance levels - aiding the advance of my favoured CNN Fear and Greed Index to shift from ‘fear’, through ‘neutral’ and now into ‘greed’.
The key with financial markets is to acknowledge from the get-go that there will be plenty of times you will be wrong, and the most important factor is always how you respond to being wrong or in a surprising spot. This has certainly been true at multiple levels around the current pandemic crisis.
If we think strictly about the financial markets, there have been two striking updates in the last few days. The first was last Thursday’s European Central Bank (ECB) press conference, which unsurprisingly announced no change to the single currency area's interest rate policy, but did increase its Pandemic Emergency Purchase Programme (PEPP) by a larger-than-expected Euro600 billion and extends its horizon until at least June 2021 with a total magnitude now of Euro1.35 trillion.
Secondly, the most striking number was the 8.7% expected contraction in the Eurozone economy this year, which the ECB believe will not be fully offset in 2021, with only a 5.2% economic growth bounce back anticipated. With inflation throughout this period staying well below the ECB's 2% target, there were also some warmer words for the recent fiscal boost efforts by Eurozone governments.
Now that the worst of the economic data is starting to arrive, investors will be looking closely at the ongoing commitments of EU leaders to not just national stimulus efforts, but pan-regional ones too.
To me that sounds like more of an opportunity than a threat. It certainly is also an environment where you can be surprised - both positively and negatively.
Hugo Pring – Lunesdale Investment Management
As always, take care and stay safe and do let us know any thoughts you may have or would like to share.
With best wishes and stay safe.
Richard, Chris and Lesley