Coronavirus Update No 8

Hello Everyone

I hope this update finds you well? 

Once again there is much nervousness in the air. The markets were well and truly rattled this week, rallied yesterday and appear uncertain today. Was it from an increase in Coronavirus cases and the new Coronavirus measures, Brexit, the Presidential election in the US… or a toxic mix of them all. Who knows?


Looking at the data ( there seems to be a significant increase in cases, certainly similar to the peak of the virus in April/May. The current 7 day average (to 19 September) of positive tests is 4,189 per day, back in April/May at the highest rate the 7 day average was 4,776. So on the face of it the new rules around social distancing do look justified. But, are the numbers higher because we are testing at a much greater rate? Is it because young people are being erm… young people and need to socially interact? Who knows! The Governments stats do show a modest increase in hospitalisation but not the huge spike that we have seen in the rate of infections. This of course could follow the same trajectory over the coming weeks, although hopefully not! 

EU & Brexit

Brexit, deal or no deal? Will no deal cost us more than Coronavirus? Will we see 7,000 trucks queuing in Kent? Should the Government be breaking International Law? Questions, questions. It all sounds like bad news but we sometimes forget that this is a trade negotiation. If both sides were in complete agreement at the outset, there wouldn’t be much point in having any negotiating! 

The good news, both the EU and the UK have broadly similar goals. The two sides agree they want a free-trade agreement, with no tariffs (border taxes on goods) or quotas (limits on the amount of goods). They are also keen to include as much of the service sector as possible. So what are the stumbling blocks? The EU wants some guarantees from the UK, a “level playing field” in relation to (amongst other things) state subsidies for business and following other EU rules in relation to worker’s rights and environmental policy. Oh and fishing in UK waters!

Some of this sounds reasonable, certainly not unreasonable except for the fact that Germany and France both spend far more than the UK on state aid and currently some (not all) of our employment laws offer greater protection for UK employees.  

And the fishing… The UK says it’s happy to consider a deal on fisheries but it must be based on the notion “British fishing grounds are first and foremost for British boats”. Fair enough (depends which way you voted), that’s what Brexit was about. But, it’s a very emotional issue which represents a very small part of both sides’ economies (less than 1% of the UK economy).

From what I have read the consensus is that a deal will be struck, probably at the last minute however some commentators are saying that even if a deal cannot be agreed now would be the best time to trade with the EU on World Trade Organisation (WTO) rules. Once again who knows!

US & the Election

The US – Mr Biden leads Mr Trump in the polls, but so did Hilary Clinton for almost all of the campaign in 2016. The US economy continues to recover with unemployment falling to 8.4% in August. This seems a slow but steady improvement and (see below) the FED expect this to continue. That’s not to say that the trend can’t reverse or that the markets could get spooked by a Biden win and Democrats winning the Senate (there are 35 Senators up for re-election which could tip the balance of power in the Democrats favour).

Believe it or not I’m trying to make this brief but it all seems like “wading through mud” at the moment. And therein lies the problem. The uncertainty, the unpredictability could weigh heavy on investor sentiment. 

Finally… There is some good news, apparently the Chancellor will be announcing some “new”, “innovative” schemes for businesses, monetary policy is likely to stay loose for some time to come (printing money). The Federal Reserve (FED) in the US has given guidance that interest rates are likely to stay at 0% until 2023 even though they expect unemployment to fall back to 4% and inflation to be around 2%. I would expect other Central Banks to follow suit, the Governor of the Bank of England has just announced that negative interest rates are “in the tool box” so watch this space!

In the UK, NS&I have slashed their rates and the monthly prize pot for Premium bond investors has been reduced. This means that there are a diminishing range of opportunities for Private Investors. Many of the UK pension funds are awash with cash. Add this to the fiscal stimulus mentioned above and it should bode well for investors.

That’s all for now. Please feel free to call or email to discuss any of the above witterings. And always remember:

“The darkest hour comes just before the dawn”
(Attributed to Thomas Fuller 1650)


Mark Abley

Managing Director

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