Weekly Client Update – Friday, 20th November
Welcome to our weekly client update of the November/December lockdown, currently scheduled to end on December 2nd, but with plenty of politicians and scientists making foreboding warnings about the ‘need for further restrictions.’
This last week has made Joe Biden’s inauguration as the next President of the United States all but a certainty as, one by one, Donald Trump’s legal challenges have dropped away. Boris Johnson and many other MPs have been forced to self-isolate after coming into contact with someone who tested positive for Covid-19. There has been more good news on potential vaccines and in the UK it was announced that sales of new petrol and diesel cars will be banned from 2030, something the motor industry said would need a ‘Herculean effort.’
We’ve looked at all the main headlines below. As always in the updates, the stock market figures quoted were correct at close of business in the relevant markets on Wednesday, with the commentary written on Thursday morning.
The Latest News
As we have just stated, Donald Trump’s various legal challenges are falling by the wayside. The current President has not yet made a concession speech, but it will be Joe Biden being inaugurated on January 20th and if reports are to be believed, pledging a $7tn (£5.3tn) ‘recovery package’ for the US economy.
The main news in the Far East was the signing of the Regional Comprehensive Economic Package (RCEP) which includes 15 countries form the world’s largest trading bloc, covering nearly a third of the global economy. Critics of China will see it as an extension of the country’s influence in the region. The RCEP excludes the US which withdrew from the Trans-Pacific Partnership in 2017.
Speaking at the Asia-Pacific Economic Cooperation forum a few days later, Chinese president Xi Jinping said that China will open up its ‘super-sized’ economy and import more high-quality goods and services. APEC also includes the US and Russia, although at the time of writing it was not known if President Trump would add his six penn’orth to the proceedings.
In Europe, the EU’s budget – including a €750bn (£671bn) Covid recovery fund – was blocked by Poland and Hungary over a clause that ties funding to adherence to the EU’s ‘rule of law.’
Depending on your political standpoint, the main news in the UK may have been Dominic Cummings leaving 10 Downing Street for the last time. More objectively, official figures showed that the UK economy grew by 15.5% in the third quarter of the year, although this growth does appear to be slowing down, raising fears of another contraction in the last quarter. The economy grew at 9.1% in June and 6.3% in July, but growth in September was down to just 1.1% as the pace of recovery from the spring shutdown slowed appreciably.
The Bank of England is currently predicting that the UK economy could shrink by an overall 11% this year. Official figures showed that UK inflation rose to 0.7% in October from the 0.5% recorded in September, as the cost of food and clothing increased.
The Stock Markets
Five of the major stock markets on which we report were unchanged in percentage terms this week. The UK’s FTSE-100 index (at 6,385), the Dow Jones index (29,438) and the S&P 500 index (3,568) in the US, Germany’s DAX index (13,202) and China’s Shanghai Composite index at 3,347 all moved up or down by just a few points. The FTSE, for example, was up just three points.
Other markets, though, recorded small gains and none of the markets we cover were down in the week. In the Far East the markets in Hong Kong and Japan were both up 1% at 26,544 and 25,728 respectively, while the South Korean market rose 2% to 2,546. In Europe the French market rose 1% to 5,511.
While this last week has brought us news of another promising vaccine, it has also delivered the sad news that the US has passed a quarter of a million deaths from Covid-19. South Australia has introduced one of the harshest lockdowns seen anywhere, with outdoor exercise and dog-walking banned and one of the UK’s health chiefs is suggesting that England could face a month of lockdown in January in exchange for five days of relaxation over Christmas.
Very clearly, restrictions, lockdowns and our masks are going to be with us for some time to come. And yet, as we reported last week, and as we confirm above, world stock markets are proving remarkably resilient. This week the Dow Jones index – despite ending the week just 40 points higher – hit an all-time high of 29,950 and several of the markets on which we report are ahead of their levels from 12 months ago.
So we remain positive about the future. The talk of a ‘V-shaped recovery’ from the economic impact of the virus has long since been abandoned. Some sectors of the economy will undoubtedly suffer lasting damage. But, as we have written previously, new companies will find new ways of bringing new products to new markets.
What of the lighter news this week? It concerns shoes…
Having brought you the stock market details above, there is now news of a brand new stock market. This one, in Asia, allows people to buy and sell rare trainers. Yes, your used running shoes which are loitering in the hall. Trading trainers, or sneakers, depending on where you are, is big business, with rare shoes selling for thousands of dollars. A pair of trainers worn by basketball legend Michael Jordan fetched $615,000 (£462,000) when sold at an online auction in August.
Sadly we can’t all be ‘basketball legends’ and therefore our old trainers will likely stay in the hall. But it makes you wonder, doesn’t it? Could Monty Don whip off his gardening shoes at the end of Gardeners’ World and sell them to the highest bidder? What about the judges’ shoes in Strictly Come Dancing?
I’m a Celebrity? No, maybe not…