Since the last update that has been provided on our website, the UK’s reopening has gathered significant speed. Households can now meet inside, travel corridors are being enacted with European countries and our local beeches have been filled with individuals from across the country. People who have warned of a second wave for this virus are seemingly being shown to be right, with the further lockdown of many U.S states.
What does the potential re-emergence of the virus mean for investing? Whilst we have seen a significant bounce in markets since late March, the most important thing to happen now is for fundamentals to catch up with equity markets. The economic consequences have been grave and have been pointed out in all of our other blog posts. Soon we will start to get Q2 GDP estimates, and these are eyewatering. An annualised contraction of 35% in GDP for Quarter 2 has been predicted according to a Bloomberg survey. The UK had the biggest fall in GDP on record, falling 20.4% in April. If economies have to shut down again on a wide spread scale, the ultimate toll on markets could be testing. Fundamentals won’t be given a chance to catch up in this scenario.
Given the above, policy from governments remains supportive and needs to be so. The total unpreparedness that struck both markets and society throughout March has been removed. We are all aware of the R-value and its constraint over our daily living! Business’ are also prepared for COVID safe working conditions. Society has adapted to a new normal.
The investment landscape is still a treacherous one to navigate. We are continuing to examine portfolios and are making recommendations where we feel appropriate.
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.
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