To V or not to V
A question that is exercising the minds of investors currently. Over the last 2-3 months many commentators have used letters of the alphabet to illustrate how activity may bounce back but mainly “V” “U” “W” and “L” have been used.
Are markets now there has been a steady flow of positive news of the relaxation of lockdown throughout the world swinging towards a “V”?
The latest purchasing managers survey has risen from 13.8 in April to 30 last month. Prior to the pandemic anything below 50 would have brought shockwaves to the markets.
Shipping arrivals in UK Ports are now on an upward trend. Shortages and prise rises for products that people were desperate to buy for the lockdown have almost disappeared. We have just about finished using all our tinned soups!
Things are definitely not back to normal but are more normal than they were.
The Society of Motor Manufacturers and Traders reported new car sales were down by 89% on a year earlier. Horrific figures but this was an improvement from the April figure of 97.3%. Given that our showrooms have only recently opened in June sales of a tenth of the normal was an incredible achievement. Expect a further improvement this month.
What is potentially the biggest risk to the economy? Clearly a second wave in the autumn and winter and how the government will react, and the measures put in place. You would like to think with more information available the government will not be reacting in the jumpy erratic and inconsistent way we have seen over the last 3 months.
Expect a stimulus package aimed at infrastructure projects to ensure that the announcement made in the March budget remain on track. For example, Germany has announced a £117bn stimulus to their economy ranging from incentives to buy electric vehicles to a reduction in VAT from 19% to 16%.
Look at things nearer to your home…
I have a bus stop opposite my house and earlier this week I actually saw someone at the bus stop and other people on the bus - this was a first for a long time.
Go down many streets and you will see an increase in the number of skips on drives. Reports suggest that builders working in home improvements have never been so busy. Lockdown has clearly inspired many people to make improvements.
And this is not only house improvements - the housing market is showing signs of a pick-up. Recent figures suggest there has not been a collapse in house prices quite the reverse as they are showing a slight increase with more people wanting the open spaces of the country life.
After 3 months of lockdown with our office closed, we are starting a phased return on the 15th June. We expect a return to normal working is going to be a lot different, many of our clients will expect our service to be a lot different from 2019 but we will listen and adapt to our clients’ needs over the coming months.
Talk of a V shape recovery may be optimistic but at a minimum the economy does not seem to going to be a L.