The PM sets path to easing restrictions

The Noise

  • On Sunday, Boris Johnson unveiled a conditional plan to reopen society, including permitting people in England to spend more time outdoors. The Prime Minister’s published regulations also confirm that garden centres, outdoor playgrounds and sports courts can now open. He said a new “Covid Alert System” with five levels would govern how quickly further restrictions can be eased.

  • Chancellor Rishi Sunak confirmed on Tuesday that the furlough scheme will be extended by four months, allowing employees to receive 80% of their salaries until October. He also said that the government will ask companies to start sharing the cost from August as the scheme will allow greater flexibility to support the transition back to work, including bringing furloughed workers back part-time.

  • The Fed Funds futures market has been pricing in the possibility of negative US interest rates next year. The Fed Funds futures market is commonly used to gauge market predictions of future US interest rates. Federal Reserve Chairman Jerome Powell said that the Fed may need to act further to pull the US economy out of its slump, but that negative interest rates are still out of the question.

The Numbers


The Nuance

Corporate Relative to recent movements, markets have been fairly stable through this short week. Data is frequently being published which paints a rather dire picture of the current state of global economic activity. The corresponding lack of volatility in asset prices only goes to show that markets have already looked through this data. These reports simply serve to confirm what we already knew: that economies have come to a standstill. As market participants now look to the future to inform investment decisions, we’re starting to observe political sentiment driving markets, not economic data.

In the medium term, it’s highly uncertain whether markets will continue to push higher as the cogs of the real economy start to turn again, or whether some of the short term gains will unwind. The good news is that the range of outcomes is now better understood and hence market prices have moved to balance both the good and the bad scenarios. Our investment process focuses on making sensible decisions to preserve and grow wealth based on detailed analysis of the data at hand.

Valuations indicate that investors are looking through this crisis despite the long road to recovery, and so we maintain a balance in portfolios between defensive assets protecting us on the downside, growth stocks which benefit from longer term trends, and cyclical stocks with strong balance sheets to ensure our participation in the eventual recovery. This balance allows us to protect and grow wealth in a safe way, ensuring that portfolios can walk the path to recovery and prosperity while making the sensible decisions required to pack for the journey.  The destination and long term prospects are attractive for those who have the right hiking shoes.


Quote of the week

"I was almost out of wind from running but luckily the suspect still had some."  A Nottinghamshire Police Officer.

Police in Nottinghamshire were nearly out of luck in their pursuit of a man who had failed to appear in court. Realising that officers on the scent were closing in, the suspect fled into woodland near Harworth. His location was a mystery to the officers who had pursued him there – luckily not for long. The suspect gave up his position in a rather dramatic way: he farted. “I heard him letting rip and followed the noises to a bush” said the officer, who subsequently found and arrested the suspect. It turns out you can’t always trust your gut.


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