What does their election mean for the German economy?

The defining image of August 2021 had little to do with the stock market on the surface, it was, of course, the withdrawal of British and American troops from Afghanistan. As some readers will know, Afghanistan has significant mineral reserves, which some estimates put at $1tn (£730bn). These reserves include lithium, so it will be no surprise if at some stage we see the China/Pakistan economic corridor extended into Afghanistan. 

August was, by and large, a good month for the majority of stock markets we report on. Most markets gained ground, with the Indian stock market having a spectacular month. 

It was a less positive month for the blockchain site Poly Network, where hackers exploited a “vulnerability in its systems” and stole some $600m (£436m) in digital currency tokens. Following an appeal on Twitter the hackers duly returned some of the money in what was one of the largest reported thefts of digital currency. 

There were signs from various purchasing managers’ indices around the world that the pace of recovery from the pandemic may be slowing down. These worries were not helped when China closed Ningbo-Zhoushan, the world’s third-busiest cargo port, due to an outbreak of Covid. 

August ended with images of the last American troops leaving Afghanistan and with Hurricane Ida hitting New Orleans, leaving one million people in Louisiana without power. 

UK 

August was a month when the news for the UK economy was mixed. Like many countries around the world the UK is recovering well from the pandemic, but there are worries that staff shortages may hamper the recovery, and that the Bank of England may need to tread a delicate path between stimulating the economy and keeping a lid on inflationary pressures. 

Figures for the second quarter showed that UK GDP had grown by 4.8% between April and June, with the expected strong performance from the services sector. The rise in output leaves the economy 4.4% below where it was in the last quarter of 2019, before the onset of the pandemic. 

International Trade Secretary Liz Truss said that she expects to complete negotiations for the UK to join the Trans-Pacific Partnership by the end of next year, as business confidence jumped to a new four year high. According to the survey by Lloyds Bank employers in the North West are feeling particularly optimistic. 

What does worry employers, however, is the shortage of staff. The Purchasing Managers’ Index for August hit a six month low of 55.3: while that still indicates optimism, it was significantly down on the 59.2 recorded in July. 

Equally worrying was a YouGov poll, which suggested that as many as 354,000 small businesses may not be able to repay the Covid loans they have received from the Government, due to cash flow problems and hold-ups in their supply chain. 

Any reader wanting their glass to be resolutely half-empty should, sadly, look no further than the UK car industry. We have written elsewhere about the impact the global shortage of microchips is having and, with staff still affected by the pingdemic, figures for July showed that just 53,438 cars were built in the UK, down 38% on July last year and the worst performance since 1956. Unsurprisingly, sales of second hand cars soared due to the shortage of new models. 

What about jobs and the high street? In the US, Amazon is, apparently, about to go into the department store business. Here in the UK a story on the BBC stated that the UK has lost 83% of its “main department stores” in the five years since the collapse of the BHS chain. To confirm what may well be the changing face of our town centres in the future, trials of shared banking hubs in two towns where all the bank branches have closed, Cambuslang in South Lanarkshire and Rochford in Essex, are to be extended to April 2023. 

If you would like other evidence of our changing shopping, and eating habits, then Greggs are to open 100 new stores, creating 500 new jobs, and Just Eat says it will create 1,500 new jobs in the North East. 

Despite the boost provided by the Euros, though, the high street continues to struggle, with City AM reporting that footfall in July was 34% down on the same month in 2019, with shoppers seemingly still unwilling to return to town centres. 

Online spending hit £10bn in July, the highest monthly spend in 2021 so far, bringing this year’s online total to £64.9bn – a massive increase of 56% on 2019. 

The UK’s FTSE-100 index of leading shares had a relatively quiet month. It rose just 1% to close the month at 7,120. The pound was down by 1% against the dollar, and ended August trading at $1.3755. 

Europe 

August is, of course, the month when Europe traditionally goes on holiday, so news in this section of the Bulletin was in slightly short supply. 

Tesla boss Elon Musk announced that he hopes to start making cars at the Gigafactory just outside Berlin in October, “or soon afterwards.” The planned start date has been pushed back after battles with local environmental campaigners and what Musk described as “German bureaucratic delays.” 

Like many central banks the ECB has taken the first steps towards establishing a digital currency, beginning a two year investigation phase that could see a digital Euro by the middle of the decade. The ECB is worried that failing to implement a digital currency will undermine the Eurozone’s monetary autonomy, as foreign technology giants – and other digital currencies – gain ground. 

We report below on measures taken by the South Korean central bank to curb rising prices, and the ECB could soon have similar problems. Rising prices, a spike in Covid infection numbers and a drop in vaccinations dented German consumer confidence as Europe’s biggest economy headed into September. 

Despite this, August was a good month for the German stock market, which rose 2% to close at 15,835. The French stock market was up by just 1% to end the month at 6,680. 

US 

August was another month in the US that got off to a good start thanks to the jobs figures. With the US economy growing by 6.5% in the second quarter, figures for July showed that 943,000 jobs had been created, against a general consensus of 870,000. Job vacancies now stand at a record 10.1m as lay-offs fell to their lowest level in 21 years. 

We have written previously about President Biden’s eye-watering $3.5tn (£2.55tn) budget proposals. In August they were approved by the US Congress and it now looks almost certain that the measures – which include significant packages for health, family support and climate schemes – will go ahead. The President also said that he wants 50% of all car sales to be electric by 2030. 

What won’t be going ahead, at least not until 2022, is a return to the office for staff at Apple. The company, which gave CEO Tim Cook a $750m payday, has said that it will delay calling staff back to the office until January at the earliest, citing fears of a further Covid surge. 

In other company news Amazon, having done so much to impact the traditional high street, is apparently considering opening department stores, with Ohio and California already earmarked as possible sites. 

The month ended with the Federal Reserve hinting that it may start to withdraw post-Covid stimulus measures later this year as the US economy continues to recover. However there are currently no plans to increase interest rates, despite a recent spike in inflation. 

In common with most of the markets we cover, August was a good month in the US. The Dow Jones index rose 1% to close the month at 35,361 while the more broadly based S&P 500 index was up 3% to 4,523. 

Far East 

We have devoted a lot of column inches in previous market commentaries to the pro-democracy movement in Hong Kong, and the subsequent crackdowns by the Chinese authorities. Perhaps unsurprisingly, official figures released in August showed that Hong Kong’s population had shrunk by 87,100 in the year to June. 89,200 Hong Kong residents left the city, although this was partially offset by inflows from mainland China. 

The Beijing authorities continued their crackdown on the tech companies in August. Tencent was the latest company to come under fire, with prosecutors filing legal action over claims its messaging app did not comply with laws protecting minors. With the authorities branding online games “electronic drugs” we can expect this tighter control of the tech sector to continue for some time. 

There was good news in Japan with the economy rebounding more quickly than had been expected, ahead of the Tokyo Olympics. The country’s GDP grew by 1.3% in the second quarter of the year, roughly twice the rate that had been forecast. 

There was less good news for Toyota, which announced plans to slash car production in September from 900,000 vehicles to 540,000 due to the global microchip shortage. At the end of the month the South Korean central bank became the first in the region to raise interest rates (from 0.5% to 0.75%) in a move aimed at curbing household debt and house prices, both of which have risen sharply in recent months. 

On the region’s stock markets China’s Shanghai Composite index had a good month, rising 4% to close August at 3,544. The Japanese stock market was up 3% to 28,090 but the markets in Hong Kong and South Korea were unchanged in percentage terms, finishing at 25,879 and 3,199 respectively. 

Emerging Markets 

There was some interesting company news in the Emerging Markets section. Square, the digital payments platform owned by the co-founder of Twitter, agreed to pay £21bn for the Australian ‘buy now, pay later’ firm Afterpay. The company has more than 16m customers and is used by 100m businesses around the world, and was seen as a key indicator for the no-credit-checks online payments industry that boomed in the pandemic. 

In a rather more conventional industry, Saudi Arabia’s oil giant Aramco saw its profits jump almost four times as the world recovered from the pandemic and demand for oil picked up. The world’s biggest oil producer said net income had risen to $25.5bn (£18.4bn) for the second quarter of the year. 

On the stock markets August was an excellent month for India’s BSE Sensex index, which shot up 9% in the month to close at 57,552. The Russian market was up 4% to 3,919 but it was a disappointing month for the Brazilian stock market, which fell 2% to 118,781. 

And finally…

August was not a vintage month for the ‘And finally’ section of this commentary. The month used to be known as the “silly season:” parliament wasn’t sitting, everyone in Europe was on holiday and journalists scrambled furiously to find stories to fill their column inches. As we covered in the introduction, August 2021 was very far from the “silly season” – but was there anything to lighten the gloom? 

Well, in this continuing summer of shortages McDonald’s ran out of milkshakes thanks to the shortage of lorry drivers. 

Appropriately for August insurer Zurich warned against the increased risk of outdoor fires – up 16% since 2019. Not in the woods though, but in your garage. It is, apparently, the fault of lockdown, as we’ve now all rushed out and bought outdoor pizza ovens, converted our garages into gyms (or bars) and made the old garden shed into a “shoffice.” Perhaps we could point our fingers at former Prime Minister David Cameron, who famously spent £25,000 on what he described as a “shepherd’s hut,” which included a wood-burning stove, sofa bed and sheep’s wool insulation. 

There’ll certainly be no problem for 12-year-old Benyamin Ahmed, from London, if he wants to put a shed/office at the bottom of the garden. He has made approximately £290,000 in his summer holidays, after creating a series of pixelated artworks called Weird Whales and selling non-fungible tokens (NFTs), which allow artwork to be ‘tokenised,’ creating a digital certificate of ownership that can be bought and sold. 

If you have no idea what that last sentence meant then you are not alone: it’s clearly indicative of how quickly the world is changing. But let’s spare a thought for Benyamin’s teacher: any day now they will be struggling to understand an essay, entitled “What I did in my summer holidays…” 

You may have seen the film The Social Network. In the film, Jesse Eisenberg, playing Facebook founder Mark Zuckerberg, is musing on wealth. “A million dollars?” he says, and shrugs. “But a billion dollars… that would be cool.” 

The film was released in 2010. Eleven years on the scriptwriters may need to add three more zeros. 

At the end of June the company won a legal battle against US regulators, the shares rose 4.2% taking Facebook’s valuation past the $1tn mark, making it the last of the big five tech firms, along with Amazon, Google, Netflix and Apple, to reach that milestone. 

A trillion dollars is £729bn, but is Facebook really worth that much? It is an interesting question for many investors, with traditional ways of valuing companies increasingly seen as irrelevant. 

Go back a few years and investors were concerned about a company’s price/earnings (PE) ratio. A company’s share price relative to its earnings-per-share. A high PE ratio usually indicated a company that was growing quickly: but one that was too high, especially when compared to other, similar companies, often made investors wary. 

Then there was the dividend yield, a simple ratio showing how much a company paid each year in dividends, relative to its share price. Investors looking for income went for solid companies with a good dividend yield. Investors looking for growth would accept a lower dividend yield, especially if the company was reinvesting profits, rather than paying them out in dividends to shareholders. 

Underlying both these traditional measures was, of course, the belief that a company’s job was to make a profit. 

How times change. Uber went public in 2019. At the time the company freely admitted that, while it had 91m users, “it may never make a profit.”

Such a statement would have been incomprehensible to a traditional investor. If a company never makes a profit, how can it pay a dividend? If it never makes a profit, how can it even continue in business? 

Facebook, of course, does make a profit. In the first quarter of this year it reported revenue of $26bn (£19bn) which was up 48% on the previous year. The company’s net receipts grew 94% to $9.5bn (£6.9bn) as the average price of its ads increased by 30% and the number of ads it delivered rose 12%. 

Many companies with spectacular valuations don’t make a profit, though. They are valued on expectations of future profits, on potential market share and on their perceived ability to disrupt traditional markets. 

All this, inevitably, makes the job of the fund manager much more difficult, as they need to look at potential future results rather than what’s happened historically and it is, inevitably, further complicated by the changes the pandemic has brought about. To think of a company in the future being valued at a quadrillion dollars may sound far fetched, but there was a time when the same could be said about a trillion.

Introduction 

As everyone expected, July saw the G20 endorse the plan from the G7 meeting in Cornwall to set a minimum global rate of corporation tax. 

A headline in City AM proclaimed that US tech giants could face a $28bn (£20bn) tax bill, with suggestions that the tax could raise as much as $87bn (£63bn). We report below on the profits the tech giants made in the second quarter of the year. If the current trend continues they could soon be filing paltry amounts like £20bn under petty cash. 

July was, of course, the month in which the UK declared “Freedom Day,’” with most Covid restrictions being eased or lifted on July 19th. It is fair to say that the decision wasn’t universally welcomed, with scientists around the world condemning it and competing for the most alarming descriptions of what might happen. Many businesses, obviously, took a different view and rushed to re-open, assuming they could find the staff…

In foreign news Chinese leader Xi Jinping used a speech celebrating the 100th anniversary of the Chinese Communist Party to warn that China would not allow itself to be bullied by foreign powers, one can assume that refers to the US. In splendidly undiplomatic language, Xi warned that foreign powers “will get their heads bashed” if they try to influence the country. 

Sadly, it was the Chinese stock market that got bashed in July. Overall it was not a good month for world stock markets with continuing worries about Covid but, as we outline below, the Chinese and Hong Kong markets were particularly hit by the actions of the Chinese regulators. 

UK 

Inflation hasn’t been a word that has featured much in our market commentary of late but, with the UK economy recovering from the pandemic, there are fears of inflation starting to increase significantly. The Bank of England’s departing chief economist Andy Haldane has warned that inflation is “rising fast” and could reach nearly 4% this year. That is well above the Bank’s target rate of 2% (which was exceeded in May, when inflation reached 2.1%). 

Rising inflation would increase the cost of index-linked gilts and in turn increase the cost of servicing the debt the government has built up during the pandemic. Interest payments on Government debt jumped to £8.7bn in June. 

The figures for May showed that the UK economy grew more slowly than expected, only up by 0.8% in the month, leaving the economy still 3.1% below pre-pandemic levels according to the Office for National Statistics. 

Aside from that, though, there was plenty of good news to report in June. Nissan announced a £1bn investment and major expansion of electric vehicle production at its car plant in Sunderland. This will create 1,650 jobs plus thousands more in the local supply chain. On top of this, in what was an excellent month for the North East, planning approval was granted for Britishvolt’s gigafactory in Blyth, Northumberland. Eventually it should produce enough lithium-ion batteries for 300,000 electric cars. It is expected that this will create another 3,000 jobs, plus those in the supply chain. 

Business confidence was up to its highest level since 2005. Consumer confidence was also up as the economy rebounded and the housing market remained strong as buyers were, according to one report, “seeking more space.” A report in City AM revealed that UK fintech firms had raised $5.7bn (£4.1bn) in a record breaking year. 

Despite all this, the UK will clearly be paying for the pandemic for years to come. It also appears that the only way the bill will eventually be paid is with a vibrant and thriving economy. Encouragingly, there were yet more forecasts of increased growth for the UK. The EY Item Club predicted that the economy would grow by 7.6% this year (the fastest pace since 1941) and by 6.8% in 2021. The International Monetary Fund wasn’t quite so optimistic, forecasting growth of 7%, the joint-fastest of the G7 countries. 

Inevitably, though, the news was not all good, with thousands of firms reporting staff shortages as the “pingdemic” forced workers to stay at home and self-isolate. The meat industry reported that food supply was on the edge of failing.

The Euros fuelled a surge in spending in the hospitality sector, and UK retail duly posted its strongest quarter on record, with sales in the second quarter of the year up 28.4% on the previous quarter. The number of shoppers in high streets and retail parks rose to its highest level since the pandemic started. That said, it is still behind pre-pandemic levels and one in seven shops remains vacant. 

Even more worryingly, small shops are said to be struggling under a £1.7bn mountain of debt with high street businesses now owing four times the amount they owed a year ago. 

It is not just retail that has been badly hit by lockdown, data generated by Oxford Economics suggested that the pandemic and subsequent lockdowns has cost businesses in the creative sector an estimated £12bn in revenue and 110,000 jobs. 

It all added up to a month where the FTSE-100 index of leading shares barely moved. It ended July down just five points at 7,032. The pound rose by 1% against the dollar in the month and closed July at $1.3902. 

Europe 

July was a relatively quiet month for European news, with the most significant development coming right at the end of the month. 

Figures showed that the Eurozone economy had grown by 2% in the three months to June, bringing the 19 nation bloc out of the double-dip recession it had suffered in the previous two quarters. 

Although the Eurozone is still below the pre-pandemic level of late 2019, the second quarter saw growth in all the individual national economies. Spain and Italy, two countries badly hit by the pandemic, saw growth approaching 3%, while Portugal reported that its economy had grown by 4.9% as tourism finally picked up again. 

The improved figures from Portugal could, perhaps, have been predicted at the beginning of the month, when Ryanair reported traffic numbers had climbed from 1.8m in May to 5.3m in June ,compared to just 0.4m in June 2020. 

With leaders at the G7 and G20 meetings having agreed plans for a global minimum level of corporation tax, the EU announced that it would suspend its plans to tax the tech giants. However, this did not stop Luxembourg’s data protection regulator imposing a hefty fine of €746m (£637m) on Amazon, claiming that its processing of personal data did not comply with EU law. Amazon said that it would contest the fine, but saw its shares drop by more than 6% on the news. 

In a month where growth was hard to find on world stock markets Europe’s two major markets fared better than most. The German index was unchanged in percentage terms, up just 13 points at 15,544 but the French market was up 2%, to close July at 6,613. 

US 

If July was a quiet month for news in Europe, it was the exact opposite in the US. 

The month started with both good news and bad news. Good news in that the US economy added 850,000 jobs in June as the economy re-opened, with the news sending the stock market to a record high. Bad news in that 200 US companies were hit by what was described as a “colossal” ransomware attack. The finger was duly pointed at the Russia-linked REvil ransomware organisation. There was more of the same later in the month when the US accused China of being behind an attack on Microsoft’s exchange servers. 

We mentioned worries about inflation in the UK section above and the same is true in the US. Consumer prices jumped 5.4% in the 12 months to June as the cost of used cars and food increased. That was up from 5% the previous month and makes the biggest 12-month increase since August 2008. 

With consumer spending, fuelled in part by the government’s fiscal stimulus, surging in June to take it above pre-pandemic levels, inflation is unlikely to fall in the near future. 

In the middle of the month President Biden signed an executive order cracking down on Big Tech, saying that “capitalism without competition is exploitation” and calling for tougher scrutiny of the tech giants. 

…And at the end of the month Big Tech noted what the President had said and reported bumper profits in the three months to June 30th as the lockdown boom continued. To give just two examples, Apple’s profits nearly doubled to $21.7bn (£15.6bn) in the three month period: Microsoft’s profits for the same period were $16.5bn (£11.8bn), up 47% year-on-year as demand for games and cloud services increased. One analyst described the figures from the Big Tech companies as “absolutely stunning.” 

At the end of the month the Federal Reserve declared that the US economy was “making progress” as it opted to keep interests near to zero. Jobs growth and the economy had strengthened but, warned the Fed, “risks to the economic outlook remain.”

Wall Street, however, was siding with Big Tech rather than the Fed’s caution. The Dow Jones index rose 1% in the month to close at 34,935 while the more broadly based S&P 500 index was up 2% to 4,395. 

Far East 

Looking through my notes for the Far East section, this month can be summarised in one word: regulators. As we will see below, both the Chinese and Hong Kong markets suffered sharp falls in the month; sudden crackdowns by the regulatory authorities in Beijing had much to do with it. 

Last month we reported that China’s ride-hailing app, Didi, duly floated on the US stock market and ended its first day with a valuation of £68.5bn (£49.6bn), the biggest flotation by a Chinese company in the US since Alibaba.

July had barely started before China’s internet regulator ordered app stores to stop offering Didi’s app, saying that the firm had illegally collected users’ personal data. Didi warned that this would have “an adverse impact on revenues” and the share price fell by 20%. A lawsuit from US investors, claiming that the company had failed to disclose discussions with the regulators, swiftly followed. 

Shares in TenCent also fell later in the month as the regulators ordered the company to end exclusive licensing deals. The regulator was trying to tackle the company’s dominance of online music streaming in China. There were also suggestions that firms wanting to list on foreign stock markets will face greater scrutiny, especially if they have data on more than a million users. 

Unsurprisingly all the Chinese stocks in the US were down on these moves by the authorities. The Nasdaq Golden Dragon Index, which follows the 98 biggest US-listed Chinese stocks, is down 45% since reaching a record high in February of this year. 

More generally, it appeared that China’s post-pandemic boom could be losing steam. Gross Domestic Product (GDP) increased by 7.9% in the second quarter, compared to the same quarter in 2020. This was less than half the rate seen in the first quarter and below economists’ predictions of 8.1% growth. 

There were no such problems for Samsung, which said it expects quarterly profits to rise 53% as the global chip shortage continues. The company forecast operating profits of $11bn (£8bn) for the three months ending in June. 

But with the regulators’ crackdowns and with the US warning companies against doing business in both Xinjiang province and in Hong Kong, it all added up to a gloomy month for Far Eastern stock markets. Hong Kong’s Hang Seng index was down 10% at 25,908 while China’s Shanghai Composite index was down 5% at 3,397. The Japanese index was also down 5% to end the month at 27,284 while the South Korean index fell by 3% to 3,202. 

Emerging Markets 

Most readers of the Bulletin will be familiar with Deliveroo. July saw the stock market debut of the Indian equivalent, Zomato. 

Shares in the food-delivery app surged 66% when they floated on the Indian stock market, with investors showing a healthy appetite (sorry) for internet start-ups that had performed well during the pandemic. Inevitably the company is still making a loss, as some analysts churlishly pointed out, but as you will know if you’ve read previous market commentaries, that no longer seems to matter with stock market valuations. 

Sadly, the major emerging markets we cover in the Bulletin didn’t fare anywhere near as well as Zomato. The Brazilian market was down 4%, closing the month at 121,801 while the Russian market declined 2% to finish July at 3,772. The Indian stock market was unchanged in percentage terms, rising just 104 points to 52,587,  within touching distance of its all-time high of 53,290. 

And finally…

2021 has been a tale of shortages, ranging from garden furniture and garden gnomes to rather more essential items. July brought the news that the UK could now be rocked by a shortage of Haribos, with the German company saying it is short of lorry drivers to deliver the sweets to UK wholesalers. 

Less concerned with Haribos were the football fans expected to drink nine million pints of beer before England’s Euros semi-final with Denmark. With a similar amount presumably drunk before the final at least beer was coming home in July, even if football didn’t quite make it…

Many clients may recall their PE lessons at school with something akin to horror, not least the dreaded burpees. Our Hero of the Month for July was Brazilian mixed martial arts fighter Cassiano Laureano, who set a new world record for the most burpees performed in an hour. Mr Laureano – who lives in Singapore – casually knocked out 951 burpees – around 16 a minute. We expect he then declared himself too tired for double Physics.

We leave you this month with news of a product that is “bouncing back” in style. As lockdown eases and more of us eat out, we are apparently finally caring what we look like and sales of stain remover Vanish have rocketed. Presumably tomato sauce stains on your shirt were acceptable during lockdown, but not as the economy opens up. 

Or maybe I missed something. Along with garden furniture, garden gnomes and Haribos, could there be a shortage of napkins? 

Is the glass half full or half empty? It’s one of the oldest questions (and clichés) there is. But right now you could be forgiven for thinking that as far as the UK economy goes the glass is not just half full, it’s completely full. 

The last few weeks have brought us a steady stream of good news. Post-Brexit the UK has agreed – or is very close to agreeing – trade deals with Norway, Iceland and Australia. According to recent reports International Trade Secretary Liz Truss is aiming to sign a free trade deal with New Zealand ‘by August.’ 

Manufacturing growth is at a 30 year high and even car sales – which were hit so hard by the pandemic – have recovered. The UK “optimism index” is at a six year high, and recent figures showed the average price of a house in the UK rising to record levels. 

Optimistic forecasts abound, with the CBI predicting that the UK economy will grow by 8.2% this year, up from a previous forecast of 6% and taking the economy back to pre-Covid levels. The economy will grow by a further 6.1% in 2022, the CBI forecasts, up from a previous figure of 5.2%. 

Still not convinced? The UK is now officially home to 100 “unicorns” – new tech firms with a valuation of more than $1bn (£721m). Tractable, an artificial intelligence start-up building computer vision tools became the latest, joining companies such as Skyscanner (from Scotland), Durham-based challenger bank Atom Bank and Darktrace, based in Cambridge, which uses AI to develop cyber-security solutions.

There are, of course, areas for concern. All is looking up, apart from the fact that ‘Freedom Day’ – originally scheduled for June 21st – has been pushed back. Apart from the fact that the UK could well face a third wave of the virus as the seemingly more infectious Delta variant holds sway. Apart from the fact that many UK businesses – especially in the hospitality sector – are struggling to re-open because of a shortage of staff.

The simple fact is that there is likely to be a mixture of good and bad news for the foreseeable future. This good and bad news will be reflected in stock markets, not just in the UK but around the world. So the only certainty is that regular contact with your financial advisers will be essential – and that your financial planning will need to be flexible and regularly reviewed. 

Yes, there is an increasing amount of good news but no economy – either in the UK or anywhere else – is out of the woods. We will continue to keep you up to date with developments and keep your financial plans under regular review. 

When Joe Biden was inaugurated as President back in January there was much talk of his proposed stimulus package for the US economy. The figure generally talked about was $1.9tn (£1.36tn), an eye-watering sum of money. To give you a comparison, the National Audit Office in the UK is currently saying that the Government has spent £372bn on Covid-19, with £150bn of that going towards support for businesses. 

By May, however, $1.9tn was looking like small change: when Joe Biden presented his Budget he revealed $6tn (£4.3tn) of spending commitments, largely funded by tax rises for wealthy Americans and business. Unsurprisingly the spending plans were condemned by the Republicans as “insanely expensive,” with claims that they would lead to record levels of debt. 

So what is the President planning to spend the money on? How will he pay for it? And, most importantly, will the huge level of spending work? 

Joe Biden’s budget is aimed at growing the US economy “from the bottom up and the middle out.” It includes more than $800bn for the fight against climate change, free school places for all three and four year olds, two years of community college for all Americans and massive investments in both physical and digital infrastructure. 

As we have noted above the plans have been fiercely criticised, and there is a chance that some members of the President’s own party may side with the Republicans over some of the proposals. The chief criticism, though, has centred on debt, with estimates that the proposals could add $14.5tn of debt over the next decade, taking US Government debt to 117% of GDP by 2031 – a level not even reached during the Second World War. 

Will the plans work? Your opinion on that almost certainly depends on your view of Joe Biden. Republicans are fiercely critical of something they see as taking US debt to a whole new level and – very possibly – driving up inflation. The Biden administration argues that inflation will stabilise at around 2% and that the higher taxes will see the whole programme paid for within 15 years. 

In 1996 Bill Clinton famously said that the “era of big Government is over.” Joe Biden appears to have brought it back. While his plans still have to go through Congress and the Senate, it seems certain that enough of his spending commitments will remain to make the fiscal hawks in both parties wince.