We’ve got our own news this week:
The Wealth Office is now authorised by the FCA and we’re delighted! It means we can now get on with the job we’ve been preparing to do since before lockdown. That feels like a long time ago so we’re keen to get on with it.
The headlines lead this week with the Chancellor’s summer economic Covid recovery plan which focused on support for young workers, a green recovery and various stimulus measures. Support for young workers and cuts on VAT and SDLT (stamp duty) seem likely to have tangible benefit while discounts on restaurant meals perhaps less so although the VAT cut has been well received by the hospitality sector which needs good news.
Let’s hope the measures work.
Opinions are divided on the October withdrawal of Furlough. It’s argued that this cliff edge means further, significant job losses and the counter argument is that such losses are a Covid’ reality we need to work through. The real issue clearly remains the creation of new jobs to replace those that are lost. Tax cuts, whether VAT or SDLT, will help consumer spending which is good but while they’re unlikely to create jobs, they should help preserve them. The Build, Build, Build pledges in the PM’s speech last week mean the acceleration of large infrastructure projects which will help create employment. It’ll take time but it’s positive news.
Greater confidence in returning to a more normal life will encourage consumer spending in retail, hospitality, leisure and travel which the economy urgently needs. Things have undoubtedly changed so it doesn’t quite feel as if we are going back to life just as it was. There have been lockdown winners and losers already, accelerating change that was already underway before lockdown. Who doesn’t now order more goods and entertainment online or buy more tech to make life at home easier (I finally bought AirPods…) along with the preferred “double screen” for the ultimate home office set up? We’re having more online video calls both at work and personally and many are reassessing their “home, office, work, life” balance with the expectation of driving a car less.
Market behaviour and conversations in the investment world suggest that this adjustment to the new normal is an important part of the recovery. FAANG stocks (Facebook, Amazon, Apple, Netflix & Google (now Alphabet)) have all seen sharp rises and equally unsurprisingly airline and hotels company share prices have dropped. Cyber security and digital business is booming whereas UK new car sales were down by 34.9% in June compared to the previous year. April and May this year were drops of 97.3% and 89% as if to underpin the V recovery to date.
As an aside, last year Toyota was the world’s largest car manufacturer, making 10m cars and a profit. Tesla made just 300,000 cars and no profit but last week overtook the automotive giant becoming the most valuable car manufacturer in the world. Perhaps a good example of irrational market exuberance but equally that things are changing. It’s unclear as yet how effective government measures will be in supporting such growth areas.
It’s encouraging that localised infection spikes are being contained without broader lockdown. Any Covid’ outbreak is a reminder of the threat, but local containment is critical to the recovery and so far that seems to be the preferred approach.
The UK stock market avoided any meaningful reaction to UK news this week. Brexit and the US/China are perhaps more relevant to its international make up (upwards of 70% of FTSE100 earnings are overseas) and resilience to Covid’ news seems improved. In many respects the outlook and underlying risks to recovery are unchanged and fortunately the same applies to the direction of travel towards economic recovery.
Our website will launch shortly, and we’ll be in contact next week, ahead of that I hope you have a good weekend.
Regards,
Kenny