Investment market update: August 2020

Posted on

Once again, Covid-19 and lockdown issues continued to influence the market. But signs of a recovery are beginning to emerge, however, risk remains, and investors should expect uncertainty over the coming months.

Chief economic adviser to Allianz, Mohamed El-Erian has warned the world’s largest economies are risking repeating the mistakes of the 2008 financial crisis.

He explained while the threat of a global depression was averted in 2008, economies failed to secure high, inclusive, and durable economic growth. El-Erian argued that key to the recovery was reopening economies healthily and responsibly while also tracking longer-term household insecurity and productivity problems.

UK

The headline figure this month was the economy shrinking by 20.4% in the second quarter. It’s the worst slump on record and puts the UK behind many other countries. Yet there have been positive signs too:

  • UK factory output PMI was at a three-year high in July with a reading of 53.3
  • Similarly, the services PMI reading beat forecasts with a reading of 58.1, the strongest increase in five years.

Despite this, concerns over job security remain. The Bank of England warned UK unemployment will hit 2.5 million, double the current figure. This links with the bank stating the Covid slump will be less severe than initially thought but recovery will take longer. GDP is not expected to return to its pre-Covid size until the end of 2021. Some of the first announcing job losses this month were:

  • Pizza Express closing 15% of stores, with up to 1,100 jobs being lost
  • WH Smith shedding 1,500 jobs after stores were affected by lower passenger numbers
  • Marks & Spencer announced 7,000 jobs would go over the next three months

Theatre businesses have also been severely affected, with many unable to generate an income since lockdown restrictions were imposed. Entertainment union Bectu said around 5,000 theatre jobs have been lost, over half of which are in the London.

Whether businesses can expect to benefit from increased activity in town and city centres remains to be seen. The Household Finance Index, from IHS Markit, shows household spending fell in August as take-home pay declined. People are increasingly worried about their financial prospects and the risk of losing their job.

While workers are slowly returning to offices, many big companies have backed long-term working from home, including Schroders and PWC, which could have a significant impact on the high street. The Chancellor’s Eat Out to Help Out has been successful in getting more people to visit their local restaurants. Over 80 million discounted meals were claimed during August.

Finally, Chancellor Rishi Sunak has stated public finances are under strain. The national debt hit £2 trillion for the first time in August, meaning it’s now 100.5% of GDP. With the Autumn Budget drawing nearer, changes to tax could affect investors.

Europe

The eurozone economy shrank by an unprecedented 12.1% between April and June. But eurozone output is rising at the fastest pace since April 2018. The PMI fared better than estimated at 51.8, once again fuelling hopes of a recovery in the coming months.

The jobs market isn’t positive though. There was a record fall in employment. The number of employed people decreased by 2.8% in the euro areas and 2.6% in the EU in the second quarter compared to the first quarter. It marked the sharpest decline since the series began in 1995.

The gloomy outlook has been compounded by tensions between the US and China over tariffs. The US government announced it would maintain 15% tariffs on Airbus and keep 25% tariffs on a range of European goods announced last October, including wine, single malt whisky, olive oil and cheese. However, new tariffs that were threatened have not been brought in.

US

The US paints a similar picture to that of the UK and Europe.

The US economy contracted by 9.5% in the second quarter as the impact of Covid-19 restrictions were felt by numerous sectors. However, the manufacturing PMI was better than expected at 54.2, signalling the beginnings of a recovery.

The jobs market is set to be a key issue in the upcoming presidential elections. While the number of Americans seeking jobless benefits fell early in the month, more than a million filled in fresh jobless claims in a clear sign that many US firms are still making cuts.

As well as ongoing tensions with Europe, the US-China trade war continues. Early in the month, trade talks were delayed again leading to concerns that an agreement won’t be reached. However, both sides have reaffirmed their commitment to reaching a deal.

President Donald Trump also took the unprecedented step to ban TikTok and WeChat with an executive order. US companies were given 45 days to stop all transactions with the firms, with TikTok threatening court action. The step has added fuel to the existing tensions between China and the US.

Asia

As the first country to ease lockdown rules, China has been seen as a litmus test for global economic prospects over the coming months. However, with retail sales falling 1.1% year-on-year, the latest figures dashed hopes of a V-shaped recovery for other countries.

Like many countries, Japan suffered a record slump in the second quarter. The economy shrank by 7.8%, which wipes out all growth achieved since 2011.

Keep an eye on our blog for the latest market updates and other financial news. Remember, investing is about time in the market, not timing the market and should focus on your goals. Please get in touch to discuss your investment portfolio.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.





    Subscribe to our newsletter