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I hope this communication finds you safe and well! We’ve been quiet over the last couple of weeks so I thought an update as we approach the bank holiday weekend would be appropriate.
Globally Countries are beginning to ease up on lock-down and restart their economies. As I write we wait to see what the UK’s response will be however the Government is obliged legally to make an announcement before 7 May. There are lots of rumours circulating in the press from relaxing the two-metre distancing rule, staggered work times, closing lifts and putting tape on the floor showing people where they can stand. Hopefully over the next day or so we will find out. One thing is certain though, we really do need to get back to work for the Nations own health as there is some evidence emerging that being in lock-down is detrimental to health and wellbeing.
We will also be watching closely for the results of the “contact tracing” experiment on the Isle of White. From what I’ve read if it works we will be encouraged to download an app that uses a phone's bluetooth technology to register contact when people come within 6ft of one another for at least 15 minutes. If a user develops symptoms of COVID-19, they inform the NHS and an alert is sent to other users they have come in contact with. Sounds pretty impressive so lets hope the trial is successful as it will lead to a further relaxation of the lock-down.
We’ve also been listening to fund managers, economists and investment commentators generally to try and interpret their take on the economy and markets. There are some pretty mixed views from these professionals. One certainty on which they all agree is that markets will recover; it's the answer to when that is proving elusive. All eyes will be looking at data coming from the USA this week in the form of the non-farm payroll data and the unemployment rate (Friday). It isn’t expected to provide good reading.
Although markets are extremely turbulent they are “Government induced” i.e. a conscious decision by Governments around the world to close their economies prioritising (quite rightly) health over wealth. This means that as long as we can get back to work in a reasonable time period the recovery can start to take place.
We talk alot about “sitting tight” and “holding our nerve” in these testing times so I’ve been doing a little further research on the subject to show why it is so important (and difficult) to often do nothing. By way of illustration, consider the period between 1999 and 2019. It included the global financial crisis, the European sovereign debt crisis, two recessions and two other coronavirus outbreaks - SARS and MERS - as well as another pandemic, H1N1.
According to data from Bloomberg and Invesco, staying fully invested in the S&P 500 between 1999 and 2019 would have turned an initial $100,000 into $324,166. Missing the 10 best days during those 20 years would have reduced the final figure to $170,548, while missing the 50 best days would have seen it dwindle to $33,572.
And finally one piece of good news in all this doom and gloom, they’ve cancelled Love Island!
Take care and keep safe.
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