Global Update Piece – Written on 17th July 2020

As we move into Quarter 3 of 2020, many will be forgiven for asking where this year has gone! It has been a challenging year for all, know doubt, with these challenges not subsiding when focussing on the end of 2020. Domestically, the UK’s ‘bounce back’ GDP figures disappointed significantly. GDP growth was just 1.8% compared to the consensus estimate of 5%, meaning the recovery feels like its getting pushed further out.[1] Below details the factors that we are looking at moving forward:

A reduction in government support: Government support has significantly supported the market since March. The FED’s historic intervention, along with coordinated action across the globe, has stabilised the situation. For the UK, Rishi Sunak has both cut stamp study and VAT for certain business’ to stimulate demand domestically. If this support across the globe starts to be wound back too quickly, insolvencies will result, and markets will struggle.

US Election: Often in U.S election years, markets have been reasonably volatile. If you add in a global pandemic and also the civil unrest caused by the killing of George Floyd, markets could be very unsettled during this period. There doesn’t appear to be a ‘better’ winner for markets – a Trump win points to loose fiscal policy that markets will continue to welcome. A democrat win should signal a return to diplomacy with China, which should dampen current rising hostilities between the two nations.

Tensions in the Eurozone: EU leaders are meeting at a face to face summit later, in order to discuss a €750bn post-Covid stimulus package. This support is sorely needed by many of the tourist dependent southern states, who want the majority of the stimulus to be handed out in grants rather than loans.[2] The frugal four northern states (Austria, the Netherlands, Denmark and Sweden) have expressed concerns over the fund. Markets will be watching closely for the outcome.

The U.K’s bounce back? As the first paragraph indicated, the U.K seems to be struggling in this crisis both in terms of the high death rate and also damaging economic effects. Measures to kick start the economy have been enacted but continued support is needed for businesses to survive.

All of the above are being constantly monitored by the Greenfields team on a rigorous basis. Recommendations have been made to clients in recent weeks, where we have felt they are relevant. We will remain vigilant for investment opportunities and intend to restructure portfolios significantly once property fund suspensions have been lifted.

Written by Greenfields Financial Management Ltd.

This article is for information only and should not be treated as advice. No action should be taken in respect of this article without independent financial advice. This information represents the opinion of Greenfields Financial Management Ltd. only.

References

[1] Jupiter Asset Managed – ‘Active Minds’, in particular ‘UK recovery pushed further out as GDP growth disappoints’. Link here https://www.jupiteram.com/UK/en/Professional-Investors/Insights/Dan-Nickols/Active-Minds-15-July 2020?utm_source=StoneShot&utm_campaign=Active+Minds%3a+UK+recovery+pushed+further+out+as+GDP+growth+disappoints&utm_medium=Email&memberurlid=2R42536690134P9758

[2] BBC News – ‘EU’s ‘moment of truth’ as leaders seek Covid funding deal’. Link here – https://www.bbc.co.uk/news/world-europe-53429064