The two biggest uncertainties facing investors are when we will have an effective vaccine or treatment for Covid-19 and whether the economic recovery will be V-shaped or resemble some other increasingly contorted letter of the alphabet.
Although these questions are obviously related, they are not entirely the same. The world will not get back to normal until the coronavirus is no longer a major problem, either because we’ve solved it medically or because enough people have caught it and got over it.
But the scale of the economic shutdown that we’ve seen in the last few months is so great that unless activity snaps back as far as it can in the meantime, we risk a vicious cycle of business failures and rising unemployment that condemns us to many years of economic struggle even if vaccines, treatments or acquired immunity arrive relatively soon.
So while stockmarkets are justifiably taking the view that a year or two of lost profits has little impact on the long-term fundamental value of companies, they are still implicitly betting that the wider economy rebounds as much as possible. Anything that is not V-shaped at first means greater medium-term risks, not just a slower recovery.
Motivational Quote Of The Day
“You do need mentors, but in the end, you really just need to believe in yourself.”
Diana Ross
Alternative Quote Of The Day
“Being wealthy when no one else is, is like being the only one at the party with a drink.”
Tim Allen
Hence watching the short-term economic data is a lot more important now than it would usually be. That doesn’t mean fretting over GDP numbers. First, these don’t arrive in time to be useful. The Office for National Statistics will release its UK GDP estimate for April to June on 12 August – more than one month after the end of the quarter. Second, we already know what it will show, a gigantic recession.
The actual magnitude is irrelevant. What matters is what’s going on right now, that means looking at more timely leading economic indicators. So far, these look modestly encouraging. UK retail sales were nearly back to pre-lockdown levels in June. Restaurant and pub trade seemed to be at around 70% of the preCovid-19 level by mid-July, which is a reasonable start given that the government has spent months trying to terrify people into staying in their homes.
New car sales were weak in June, but it seems buyers may have held back in the hope of a government incentive scheme. The picture appears broadly similar elsewhere: the OECD composite leading indicators show activity starting to bounce back globally in June. Unemployment remains very high and job vacancies low, but hiring and firing always lags the cycle. In short, uncertainty is high, but if you’re an optimist, a V certainly looks possible.
Today’s National Day
NATIONAL NIGHT OUT DAY !
PUBLISHERS NOTICE
Just In…
Hello,
We have just received the email below from one of our customers. I thought you might be interested in what he has to say…
From: John C******* [john********@*****.com]
Sent: 09 August 2020 09:58
To: Admin
Subject: “The Hermes Strategy “
Dear Bill,
Well that was a result —- I certainly wasn’t expecting the system to pay for itself in 2 days with 66/1 shot Star of Emaraaty! I have backed 66/1 shots before, but I don’t think I would have picked this one!
Once again ——Thank You Very Much.
Kind Regards,
John
If you’d like full details on what he is talking about pleaseClick Here
All The best
John