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Issue 16 - Second Spike Concerns As Covid Numbers Grow Globally

Although it seems like an eternity, I reminded myself this morning that it’s just 6 months since the Chinese admitted that Covid-19 is contagious between humans and that the world first became aware that there was a virus spreading in China that might actually cross borders.  In the overall scheme of things, 6 months is a relatively short period of time and yet, how things have changed in that period.

As lockdown measures are being relaxed throughout the UK and other parts of Europe, we are seeing an increase in the virus in many parts of the world, which shows that the worst is far from over.

We hear talk in the UK and other European countries about wanting to avoid a second spike and taking precautionary measures and actually, I think now that a lot more is known about the virus and how to deal with it, we are more likely to be able to cope if things do start to accelerate again, particularly in the winter months.

I believe that the local lockdowns that we have seen in Leicester will become a more prevalent feature, if indeed, we see increases in numbers of cases.

However, I still have some scepticism about the statistics that we see about numbers globally, because clearly, there is a huge difference in how the numbers are reported.

It seems to me such a nonsense that the UK reports deaths as being covid related if the person had covid at any point prior to their death, rather than measuring whether they died as a result of the virus.

Similarly, with the approach taken in Scotland, where they’ll only record it if the person had tested positive for covid within 28 days of their death is also nonsensical, because somebody could have died after more than 28 days, but still have died as a result of covid.

The truth obviously lies somewhere within the statistics, but wherever the actual numbers are, they are still frighteningly high, and we can’t afford to be complacent.

Unfortunately, familiarity does tend to breed complacency and I’ve certainly noticed this with some people who are clearly taking the ‘it won’t happen to me’ approach to life.  Thankfully, that would seem to be a minority, but nonetheless, one to be aware of.

Even with the funeral of Jack Charlton this week, with the crowds of people that turned out to pay their respects as his funeral cortege passed through the street, there was only limited evidence of people wearing face masks or indeed, social distancing.

On the flip side again, city centres are still deserted and talking to one of our friends who works in London, he was saying that the streets are indeed deserted and there’s no real sign of people returning to work.  I read in the press a couple of days ago from one lady who was saying that she lives alone and was really excited at the prospect of going back to work in the City, but she was fearful of doing so because she needed to travel by underground train and the close confinement of a crowded underground carriage, even wearing a face mask and taking as many precautions as she could, was enough to stop her from going back to work.  I am sure that there are many people who feel like this.

Speaking to somebody else in Spain earlier in the week, he was explaining that face masks are now mandatory for anybody who goes outdoors rather than just going to shops or restaurants.  We know that in the UK from Friday of this week, masks will be mandatory in shops etc., but not in open spaces.  I wonder how long before this becomes necessary as well?

The overriding message that I take from all of this is that it is a changed world and that the old normality of being able to socialise in crowds that we took so much for granted, is going to be thing of the past for a long time to come.

I personally believe it is appropriate to remain vigilant and to take sensible precautions whilst not becoming an absolute recluse.  Mind you, even I’ve noticed with myself that I’m becoming paranoid about washing hands at every opportunity – no bad thing really!

Turning now to the financial world, we have seen a huge announcement in the EU this week, with €750 billions of recovery funding being agreed between the remaining 27 EU member countries.  This has generally been accepted positively by markets and indeed, we saw a bit of a flurry on Tuesday of this week, only to be dented again today with more corona virus concerns.

As Companies have been announcing their second quarter results to the end of June, these have shown a wide disparity between those Companies who have suffered badly from the effect of the virus and those who have actually benefitted as a result of the changed way of living.

However, in many cases, whilst results have been bad with some Companies, they’ve not been as bad as expected and again, this is therefore viewed as being positive by the markets.  As we know, markets tend to anticipate up to 6 months ahead and therefore, they are always second guessing what comes next.  This in a way, is what gives rise to the short term volatility when things don’t quite work out as anticipated.

More and more, the Fund Managers that we are working with are talking about sustainability, strong balance sheets and looking for quality Companies who are well positioned to benefit from the recovery.  Conversely avoiding Companies that are poorly equipped or in particularly vulnerable areas.  This in itself, could well have an impact on some of those Companies, particularly the weaker ones.

Throughout though, although views differ, there seems to be a consensus that the medium and longer term does look positive and that a return to a general bull market over the next 3 – 5 years is likely to follow as things settle down.

As always, I will be keeping in touch with those Fund Managers and will keep you appraised of our views, but if at any time, you have any direct concerns or ideas that you would like to share, I would be pleased to hear from you.

With our best wishes

Richard Chris and Lesley

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