May Day

So we are confined to barracks for a further 3 weeks. That will take us to the anniversary of VE Day. Which this year replaces May Day. Unfortunately the planned celebrations to mark the 75th anniversary will not be held. We are now hoping for VC day – victory over coronavirus day, however we can only try to contain viruses, they have been around on this planet for much much longer than man. So some control over this 5th known coronavirus to transfer to man is all we can hope for.

As an aside, just in case we can ever go back to a pub and enjoy a social quiz…..

May Day, May Day, May Day, the distress radio call comes from the french m’aider, which translated in to English is – help me. That makes much more sense now doesn’t it.

Engine out

So there we were on 25th February, flying nicely at 7500 on the FTSE 100 and suddenly what was initially seen as a slim proposition became real, we were in free-fall and dropped to just below 4600 before power was restored levelling us off at an unsteady but safe 5000ish, give or take a couple of hundred points either way. We now seem to have climbed and steadied around 5500. With things in the cockpit back under control it’s time to look around and plan our future steady ascent. We have already begun to jettison a few items of cargo, shares which were likely to weigh us down in the medium term, which leaves us room to pick up some shares which should help power us higher. For some clients it felt like this fall was going to take us all the way back to earth, which is impossible. But thankfully for the vast majority of us ” this certainly wasn’t our first rodeo”.

We plan for times like these, I blogged about how we remain prepared recently. This week we have added some more thrust to our most speculative portfolios, our Go for Growth and our AIM portfolio. As I write this we have our punchier Adventurous portfolio ready for rebalance, that could happen early this week. Next will be changes to our Moderate portfolio once I have seen more evidence that we are not running into a further bout of turbulence. And finally a few minor changes for our Cautious portfolio

damned if you do, damned if you don’t

All governments around the world are doing enough to cover their own backsides to hopefully ensure that they get re-elected. Don’t kill too many voters but don’t impoverish too many voters either. It’s a fine line unless you have a single party all powerful state or dictatorship.

Hopefully it looks like the action taken in the UK was enough to save the NHS from absolute carnage. It is perhaps too early to say as London will peak before the rest of the lagging UK, but critical care beds are still available and the Nightingale hospitals remain largely on standby.

Half term report comment – good job UK citizen!

recovery indicators

The recovery of the Chinese economic engine will be no indicator of how fast Western economies will recover. The Chinese people understand they are on their own with no state funded financial bail-outs. Cough outside there and you are more likely to be whisked off by a van only to be returned to your loved ones in a standard issue urn months later. All citizens will return to work because they have to, none will spend any money on non-essentials. They need to rebuild the savings they have just spend surviving this pandemic. Forget discretionary purchases by the middle class too for a while, like iPhones and Mulberry handbags.

pent up demand

Economists talk of demand shocks and supply shocks. The price of oil and of much about everything in this world is governed by the law of supply and demand. OPEC+ can try to cut collective oil output to increase the price, but they can’t increase the demand. Mankind has been stopped in its tracks. Unbelievably the price of oil has gone negative in certain markets. Buyers are paid to take the stuff away. The rigs can’t be stopped and there are no storage facilities left to fill.

Thankfully this demand shock should prove to be short-lived in the Western world. Once the middle class is let off its choke chain and is allowed to consume goods and services again, I believe that they will fill their boots with a gusto. From a haircut, a meal out and right up to a luxury holiday (hopefully) and a new car purchase. A certain carefree attitude will prevail where those left with savings will buy things they don’t need and pay for experiences that they would never have done before the reality of Covid-19 set in. You remember before Covid-19? When we all believed we were immortal.

the new normal

Unfortunately my vision of Utopia will not be experienced by all. For many, including some of our best friends, the new harsh reality is that there is an additional predator on the block. Like a wolf that stalks the most vulnerable in the herd, Covid-19 is just waiting to prey on those with existing health issues and on the less fortunate. The prison doors may have been flung open, but many won’t attempt an escape any time soon. Their former prison has become their new sanctuary. The risk of infection out there is too great to take the risk. Clients of mine may recall that risk has two components.

• The chances of something bad happening. In this case contracting the virus.
• The variable consequences when that something bad happens. In this case a brief sore throat and headache or even nothing at all, right through to an earlier than expected death.

feedback and action to take

As always please comment if you have any information that is relevant to our client collective. I certainly don’t have a monopoly of knowledge. Please help to keep up our collective patience and stay safe in lockdown.

As financial planners we are here and waiting to help. Every client’s future has changed, I’m used to that, because circumstances change all the time. We pick that up and adapt at our regular review meetings. But this is different as every client’s future has changed at exactly the same moment in time. Many of us are re-evaluating our future plans in line with current events.

“Everybody has a plan until I punch them in the mouth.”

Mike Tyson