Investment market update: August 2020

| Category: News

Once again, Covid-19 and lockdown issues continued to influence the market. But signs of a recovery are beginning to emerge, however, risk remains, and investors should expect uncertainty over the coming months.

Chief economic adviser to Allianz, Mohamed El-Erian has warned the world’s largest economies are risking repeating the mistakes of the 2008 financial crisis.

He explained while the threat of a global depression was averted in 2008, economies failed to secure high, inclusive, and durable economic growth. El-Erian argued that key to the recovery was reopening economies healthily and responsibly while also tracking longer-term household insecurity and productivity problems.

UK

The headline figure this month was the economy shrinking by 20.4% in the second quarter. It’s the worst slump on record and puts the UK behind many other countries. Yet there have been positive signs too:

  • UK factory output PMI was at a three-year high in July with a reading of 53.3
  • Similarly, the services PMI reading beat forecasts with a reading of 58.1, the strongest increase in five years.

Despite this, concerns over job security remain. The Bank of England warned UK unemployment will hit 2.5 million, double the current figure. This links with the bank stating the Covid slump will be less severe than initially thought but recovery will take longer. GDP is not expected to return to its pre-Covid size until the end of 2021. Some of the first announcing job losses this month were:

  • Pizza Express closing 15% of stores, with up to 1,100 jobs being lost
  • WH Smith shedding 1,500 jobs after stores were affected by lower passenger numbers
  • Marks & Spencer announced 7,000 jobs would go over the next three months

Theatre businesses have also been severely affected, with many unable to generate an income since lockdown restrictions were imposed. Entertainment union Bectu said around 5,000 theatre jobs have been lost, over half of which are in the London.

Whether businesses can expect to benefit from increased activity in town and city centres remains to be seen. The Household Finance Index, from IHS Markit, shows household spending fell in August as take-home pay declined. People are increasingly worried about their financial prospects and the risk of losing their job.

While workers are slowly returning to offices, many big companies have backed long-term working from home, including Schroders and PWC, which could have a significant impact on the high street. The Chancellor’s Eat Out to Help Out has been successful in getting more people to visit their local restaurants. Over 80 million discounted meals were claimed during August.

Finally, Chancellor Rishi Sunak has stated public finances are under strain. The national debt hit £2 trillion for the first time in August, meaning it’s now 100.5% of GDP. With the Autumn Budget drawing nearer, changes to tax could affect investors.

Europe

The eurozone economy shrank by an unprecedented 12.1% between April and June. But eurozone output is rising at the fastest pace since April 2018. The PMI fared better than estimated at 51.8, once again fuelling hopes of a recovery in the coming months.

The jobs market isn’t positive though. There was a record fall in employment. The number of employed people decreased by 2.8% in the euro areas and 2.6% in the EU in the second quarter compared to the first quarter. It marked the sharpest decline since the series began in 1995.

The gloomy outlook has been compounded by tensions between the US and China over tariffs. The US government announced it would maintain 15% tariffs on Airbus and keep 25% tariffs on a range of European goods announced last October, including wine, single malt whisky, olive oil and cheese. However, new tariffs that were threatened have not been brought in.

US

The US paints a similar picture to that of the UK and Europe.

The US economy contracted by 9.5% in the second quarter as the impact of Covid-19 restrictions were felt by numerous sectors. However, the manufacturing PMI was better than expected at 54.2, signalling the beginnings of a recovery.

The jobs market is set to be a key issue in the upcoming presidential elections. While the number of Americans seeking jobless benefits fell early in the month, more than a million filled in fresh jobless claims in a clear sign that many US firms are still making cuts.

As well as ongoing tensions with Europe, the US-China trade war continues. Early in the month, trade talks were delayed again leading to concerns that an agreement won’t be reached. However, both sides have reaffirmed their commitment to reaching a deal.

President Donald Trump also took the unprecedented step to ban TikTok and WeChat with an executive order. US companies were given 45 days to stop all transactions with the firms, with TikTok threatening court action. The step has added fuel to the existing tensions between China and the US.

Asia

As the first country to ease lockdown rules, China has been seen as a litmus test for global economic prospects over the coming months. However, with retail sales falling 1.1% year-on-year, the latest figures dashed hopes of a V-shaped recovery for other countries.

Like many countries, Japan suffered a record slump in the second quarter. The economy shrank by 7.8%, which wipes out all growth achieved since 2011.

Keep an eye on our blog for the latest market updates and other financial news. Remember, investing is about time in the market, not timing the market and should focus on your goals. Please get in touch to discuss your investment portfolio.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Testimonials

Working with Blue Ocean has enabled myself and my wife to invest our pension savings with the confidence that they are being managed by a professional team of qualified financial advisers. They have been very supportive and responsive when we've requested a detailed analysis of our investment performance and the outcome has been positive in terms of the expected returns. I have recommended family and friends to Blue Ocean and they have been equally very satisfied with the service.

Glen Ridout

Kent

A client since 2011

We would have no problem whatsoever in recommending the services of Blue Ocean for sound financial appreciation and advice, all handled in a friendly, convivial and concerned manner. Blue Ocean are always looking at how they can go that extra mile for their clients. This is a rare positive commodity in any business environment in today's world. The financial advice is always considered and simply explained in terms of what if and if you invested here etc. There is no pressure put on me to invest in high-risk return possibilities and at all stages the advice given is tailored to the perceived situation of their clients.

Barry William Ednie

Tonbridge, Kent

A client since 2013

Over the past 18 years, I have received very reassuring advice on my investments and always been treated in a friendly but professional manner.

Jacqueline Prosser

Surrey

A client since 2001

I have known John for over 20 years and have always been satisfied with his integrity, knowledge and reliability. I recommend him to business and family contacts without reserve.

Paul Richardson

Surrey

A client since 2002

Bespoke service... friendly, helpful staff.

Jane Stevens

Dartford, Kent

A client since 2017

Blue Ocean resolved a difficult situation in a very satisfactory way. The whole staff are extremely friendly and helpful and it was very cost-effective.

Richard Mersh

Kent

A client since 2017

Since we have used John and the team over the years our investments have gone from strength to strength. We’re very happy with the work they have done for us. I am now in a position to retire with no money worries.

Keith Yeates

Kent

A client since 2008

Honest, well versed, ‘personal touch’ business out to make sure everyone has satisfaction.

John Townsend

Hearn Bay, Kent

A client since 2017

I have received honest advice in a relaxed, friendly environment with my personal circumstances paramount.

Janice Hill

Kent

A client since 2009

I love Blue Ocean Hartley! So very helpful and fantastic staff.

Christine Bryant

Dartford, Kent

A client since 2009

Blue Ocean has always given me the help and advice that I feel protects my family’s investments. Not only have we used Blue Ocean for more than 20 years, but the team have always made us feel welcome. Always at the end of the phone for any advice we may need. Many thanks!

Russell Paul David

Rochester, Kent

A client since 2001

I have been advised by Blue Ocean for the past 21 years, and have always found their service sound, helpful and supportive.

Louise Bober

Kent

A client since 1999

Having the benefits of sound financial advice from Blue Ocean for over 20 years, I would recommend them without hesitation.

Andrew Martin

Medway, Kent

A client since 1999

We have used John Doyle and Blue Ocean for over 20 years as our financial adviser for everything from mortgages, pensions, income protection, trusts and investments. His advice has always been realistic, reliable and no-nonsense. He has always understood our requirements and has advised accordingly.

Michaela Franklin

Kent

A client since 1999

I find them very easy to deal with. Extremely knowledgeable and with no pressure.

George Howell

Bexleyheath

A client since 2016

I moved my investments to Blue Ocean in 2014. The advice I have received has been more professional and my investments have performed better. The staff are polite and always quick to respond to queries.

Lee Menzies

East Sussex

A client since 2014

Having been a client of Blue Ocean for the past 3-4 years, I can honestly say there is nobody I trust more with regards to my financial future than John and the team. Too good to be true? Not with Blue Ocean!

Liam Ryan

Essex

A client since 2016

Very good, friendly advice from a good team.

Stephen Williams

Kent

A client since 2010

Knowledgeable, approachable and always happy to discuss my issues.

Michael Southall

London

A client since 2018

Professional and reactive to any questions regarding your investment.

Michael Gould

Kent

A client since 2011