The (relative) calm of markets in the week before Easter allowed us to discuss our analysis of the longer term ramifications of the virus, of governments responses and finally to what the economy will look like when it emerges from lock-down.
Last week saw little development from the previous one, which is only a relief in some ways, but it allows us to circulate this more brief “catch-up” note.
Equity and debt assets saw little change over the week and reduced volatility in comparison to the frenetic preceding weeks. US joblessness rose yet again: 22m people in a month. A proportion of these people are signing on for income support because their businesses are not allowed to operate, but many jobs will have been destroyed by the lockdown. This is one in eight US workers. It is a staggering figure and unprecedented.
The downside of a quiet week is that the lockdown looks like it will be extended and the path out of it remains opaque.
We are starting to see some data emerge. The empty supermarket shelves were more down to marginal increases in demand affecting hyper-tight supply chains, than people panic buying (according to Tesco data). There were a small number of panic buyers but the shortage was mostly down to displaced consumption – people couldn’t go out for dinner any more so they needed more provisions at home.
We were active on behalf of our clients in relation to their equity and debt allocations as markets fell in response to the emerging pandemic. On Friday last week we made changes on a thematic level. The nature of work and the shape of the economy is changing at a significantly faster pace than was foreseeable before the pandemic. We want to be on the front foot on this and get exposure to these investment opportunities. We are building up cash reserves again after the bounce in markets, and are making investments in Digitalisation and Healthcare innovations. Two investment themes that we anticipate will thrive in the coming months and years. We will discuss these themes in greater depth next time.
We should flag that security and control systems in the big private banks are creaking. We know of one of the biggest who have had to abandon some security protocols because their tech systems collapsed. Employees working from home overwhelmed their systems and the only way they could continue to operate effectively (or maintain the illusion of operating effectively) was to reduce and eliminate security barriers. These vulnerabilities will be attacked and exploited by hackers so we would urge extra scrutiny and vigilance should you have any such relationships.