Jo Welman’s thoughts about the macro investment outlook communicated to his investment clients:
At the close of business last night the FTSE 100 had fallen 43% in 2020 and the FTSE 250 which includes medium sized companies had fallen even further. The fact that our portfolios have fallen significantly less is of little consolation – we all feel a lot poorer than we did just one month ago. I cannot tell you where and when this bear market will end. Even if I knew the length of the economic shutdown, the extent of the damage that this complete shutdown of the UK economy will not be known for some considerable time. But there are certain assumptions that I believe can offer some guidance as to where we might end up.
Pictures of deserted city centres clearly demonstrate the economic frontline and we can all understand the sectors of the economy that have been the earliest and the hardest hit by the shutdown. Shops, hospitality, sports and travel are hurting badly. So these are sectors where there could be lasting damage and that might struggle to recover from the closure of their businesses. Before considering other sectors of the economy, we need to think for a moment about the long term social and workplace consequesncies of this economic trauma. For instance, will people continue to consume entertainment in crowded cinemas or at home? Cineworld or Netflix? Will insurance brokers jump back into aeroplanes and fly to meetings in Bermuda, or continue to use conference call facilities? And the workplace – will companies force workers into crowded trains and expensive offices when the current pandemic has shown that many can work effectively from home? Land Securities or Wework? Individual businesses in all sectors will have their own particular circumstances that will influence their survival prospects – high fixed overheads and high borrowings will be a dangerous combination for those in the affected sectors, despite the Government’s help with loans, business rates and salaries.