Please find below our Investment Market Update as at 7th July 2020.
Blue Sky Investment Market Update
“Spend, spend, spend!”
These were the notorious words from a lady called Viv Nicholson whose husband won the football pools in 1961. She was followed relentlessly by the tabloid journalist and even a musical about her ran in the West End.
Apparently their £3.36 million fortune (in today’s terms) was squandered on expensive sports cars, fur coats, home appliances, jewellery and lavish holidays.
Tomorrow the government will encourage the UK population to go forth and spend in an attempt to ‘gear’ the recovery by possibly reducing VAT and easing Stamp Duty thresholds. Lavish holidays may be a step too far right now, but spend we must if we are going to avoid the economy remaining anchored in the doldrums.
There is even talk of potentially giving every UK citizen £500 to spend on the high street to stimulate activity. Australia did something similar during the credit crisis in 2008-09 by giving 900 Dollars and in the US recently, there was consideration to gift every American citizen 1,000 dollars.
The government and the Bank of England do not want to see lower GDP figures and wish to nip any signs of deflation in the bud. Lack of confidence in uncertain times can lead to people storing money and not spending. There is no doubt that many of us have got used to not spending much during lockdown and there are concerns that this habit will continue and become ingrained. Offering money to spend on the high street will allow the government to collect VAT, income tax and national Insurance. Much needed at a time when the flow of money into the public coffers is relatively low.
Some businesses are booming
I’ve had a number of chats with local business people recently, and their stories regarding the impact of this virus are wide and varied. Clearly anyone in hospitality and leisure have experienced severe issues which, in some cases, has led to them having to either close the business or ‘mothball’ it to next year.
Others have been surprised by the uplift in business activity. A fireplace superstore, bathroom and kitchen suppliers, landscapers and of late, builders, have been the benefactors. One company told me that their turnover has increased by 60%!
Having time on our hands has meant, in many cases, those projects which were on the back burner have come to the fore. With the outlook for holidays uncertain, it appears that excess money has been spent on bigger ticket items.
Invite to the infrastructure Webinar
Spending is very much the emphasis when it comes to infrastructure. We hear the term ‘infrastructure’ nearly every day but what does it relate to and what does it mean to us, the economy and your portfolios?
Tune in for our 30 minute webinar on the 15th July for a great insight with Nigel Aitcheson from Foresight. Click here to reserve your spot and on Friday you’ll receive an email with the Zoom event info.
“Heaven knows I’m miserable now”
Back to Viv Nicholson again. Music aficionados may know, that the Smith’s used a photograph of Nicholson on the sleeve of their single entitled “Heaven knows I’m miserable now”. Spending was supposed to make her happy, but she lost it all.
Here at Blue Sky, just like the government, we want you to spend. But we don’t want you to end up like Viv Nicholson!
Money gives you choices, but it doesn’t generally make you happy. We find that our clients often struggle to spend and need encouragement or a good healthy shove to ‘splash the cash’. There is no point in being the richest person in the care home, or in the graveyard, is there? It’s important to enjoy your money whilst you have good health, and important to think about passing your money to the right people, at the right time and in the right way! But what’s most important is having a plan which informs you and gives you choices. We all need to know how much we can spend and when. Every person’s plan is different, all that is required is for you to decide how you wish to live your life! I’m assuming fur coats aren’t on the agenda…?
Europe showing the best signs of recovery
As we see a transition out of lockdown, it appears as through Europe is leading the way with its economic recovery. Germany, France, Italy and Spain are not devoid of problems but according to Bloomberg Economics they have made the most economic progress.
Activity in the UK is slower and the same can be said of Canada and the US. The recovery is sluggish in Japan after a promising initial rebound but ironically, the best economic growth is in China and parts of Asia.
Enjoy the week.
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.