September 2020
This month Coronavirus looks to be starting the winter resurgence officials had feared; with the UK daily infection rates climbing rapidly into the thousands. The relaxed rules of July and August are now giving way to tighter restrictions on gatherings and additional government provisions via a new Job Support Scheme to replace the furlough measures. Certainly, in both cases it can be anticipated the government will have to do more before the winter is over.
The increase in unemployment has so far been modest given the huge drop in GDP but large numbers of employees have still not returned to work. Currently the UK has been artificially shielded from real unemployment pain with 12% of the workforce on furlough. However, moving from the furlough scheme to the far smaller universal credit will inevitably hit demand. A reduction in business contributions and enhanced unemployment benefits may yet be announced.
Then there is the continuing saga of the Brexit negotiations with all its issues and intricacies meaning the likelihood of a deal meeting Boris Johnson and his supporters’ requirements; essentially full market access and full discretionary decision making, appear unlikely. All this continued uncertainty and deadlock in negotiations have continued to lead the fall in sterling both against the euro and dollar.
Meanwhile, the Bank of England continues to hold interest rates at their historic low of 0.1 per cent and even discussed the possibility of implementing negative interest rates in its efforts to stimulate the economy in the face of the coronavirus-inspired recession and potential effect of no-deal with the EU.
Within the US we saw the big tech stocks being taken down a peg or two with the selling of tech stocks, and equities more generally. This can be contributed to weaker than expected economic data leading to some investors extracting profits after the strong returns from technology stocks this year. Despite this, the S&P 500 still remains around 7% up in 2020, with the recent tech stock sell-off at best erasing a couple of weeks’ worth of gains.
Elsewhere, employment figures from the European Union show that the coronavirus shutdown and subsequent fall in GDP is feeding through to job losses and with several countries due to end their furlough schemes at the end of September employment could fall further this autumn.
Finally, Yoshihide Suga replaced Shinzo Abe as prime minister of Japan after his predecessor stepped down due to ill health. Suga has already committed to the long running Abenomics programme of economic reforms, so we can expect little change.
| Asset Class | Proxy | 1-month return | 3-month return | 6-month return | 1yr return |
| Cash | UT Cash/Money Market | -0.01% | 00.03% | 00.43% | 00.12% |
| UK Corporate Bonds | UT UK Fixed Interest | 02.11% | -00.09% | 03.13% | 02.92% |
| Emerging Market Equities | MSCI Emerging Markets | 00.66% | 04.92% | 08.13% | 05.37% |
| European Equities | MSCI Europe ex UK | 01.07% | 01.60% | 05.94% | -00.51% |
| Gilts | FTSE Gilts All Stocks | 01.41% | -00.67% | 02.63% | 03.41% |
| Japanese Equities | MSCI Japan | 05.16% | 03.88% | 09.50% | 01.91% |
| Property | UT Property | -00.43% | 00.06% | -09.09% | -11.19% |
| UK Equity | FTSE All-Share | -00.15% | -02.83% | -09.16% | -16.59% |
| US Equities | S&P 500 | -00.72% | 04.31% | 13.34% | 09.13% |
Disclaimer:
*The value of your investment can go up as well as down, you may get back less than you originally invested. Circumstances are subject to change.
Performance from the past or yields quoted should not be considered as reliable indicators of returns. This communication is for general information only and is not intended to be individual advice.