Contact us: 01799 543222

How Brexit may affect the Stock Exchanges

Archive for the ‘Investments’ Category

How Brexit may affect the Stock Exchanges

Wednesday, November 11th, 2020

As the UK is set to depart from the frameworks of the EU, there is concern amidst London’s biggest share trading venues surrounding the topic of where they may be able to buy and sell European stocks and where they may not.

The dilemma

In order for trading to continue as normal, the EU would have to recognise that the UK and its exchanges are operating with rules and regulations that can be considered ‘equivalent’ to those under which the EU functions. Alasdair Haynes, the Chief Executive of Aquis Exchange who hold 5 per cent of the European Market, is very clear about his view of what is to come. He says, “there will be no equivalence. People are living in a pipe dream if they think it’s going to happen. People are getting prepared to move business over.” 

A declaration of no equivalence means that some EU based institutions will be prohibited from trading in London. That trading will be moved to other European cities, two popular examples of which are Amsterdam and Paris, which leaves London at serious risk of losing its dominance as a share trading centre. 

Currently, London handles up to 30 per cent of the European daily market, the daily market as a whole being worth €40billion. As exchanges opt to move their venues elsewhere in Europe to avoid the implications of share trading obligations (which determine which exchanges investors can trade their liquid stocks in), London’s grip on that 30 per cent will inevitably fall. 

Announced Plans

The London Stock Exchange Group’s share trading platform Turquoise has confirmed through a spokesperson that they now intend to open a base in Amsterdam at the end of November, from which it will trade EU shares. Cboe Europe, the largest stock exchange in Europe who are currently headquartered in the UK, has submitted their application to also establish an entity in the Dutch capital. TP ICAP, who are also headquartered in London at present, has begun discussion with French regulators with regard to setting up an EU base in Paris. While all three of these exchanges intend to keep their London venues where they are, their new plans are indicative of the overriding sense of uncertainty over the shape that Europe’s cross-border share trading market may take post-Brexit. 

David Howson, president of Cboe Europe, stated his concern by saying that “we need to be mindful Brexit doesn’t result in trading reverting back to national exchanges and undo all of the good work we’ve done to bring competition to [the] European equities market over the past decade.” 

November market commentary

Thursday, November 5th, 2020


The end of October brought plenty of bad news for Western economies as scientists stood in front of graphs and talked of ‘inexorable rises’ and ‘exponential increases.’ 

Unsurprisingly, stock markets duly took note. We report on 12 major stock markets and only two, India and Hong Kong, were up in October, with all the major Western markets falling. 

Away from stock markets, October brought us within three days of the US Presidential election. As we write, Democrat candidate Joe Biden is the strong favourite to become the 46th President of the United States. But could Donald Trump upset the odds as he did four years ago? You may well know the answer by the time you read this. 

As we always do, let’s look at all the detail and try to find some light amid the gloom. 


October’s main news for the UK came on the evening of Saturday 31st as Prime Minister Boris Johnson announced a second national lockdown, beginning on Thursday November 5th and lasting until (at least) Wednesday December 2nd. 

The Furlough scheme has been extended for another month and there seems certain to be claims for extra support from those businesses forced to close for a second time. Having scrapped the Autumn Budget and presented his Winter Economic Plan in September, you suspect that Chancellor Rishi Sunak may have to find yet more cash.

The impact of the pandemic is certainly starting to be felt by large employers. October saw EasyJet make its first ever annual loss and pubs chain Wetherspoons, which was founded in 1979, make its first loss since 1984. Rolls-Royce announced that it would look to raise £2bn from shareholders through a rights issue after a “sharp deterioration” in civil aerospace. 

There was more evidence of the inevitable trend away from retail shopping. H&M announced that it would close 250 stores, whilst Edinburgh Woollen Mill, owner of the Peacocks and Jaeger brands, announced that it would appoint administrators, putting 21,000 jobs at risk. The company described trading conditions as “brutal.” 

…And with 69% of Londoners apparently working from home (compared to 18% in Paris and 25% in Berlin), the outlook for the ‘commuter economy’ can only get worse, especially with the announcement of a second lockdown. 

The outlook for the hospitality industry was no better, with prospects for the hotel industry said to be the ‘worst for 50 years’ and the imposition of new rules on alcohol in Scotland described as ‘the death knell’ for the country’s hospitality industry. 

It is, though, an ill-wind. Tesco’s profits surged as their online orders doubled, and ASOS reported that it had added 3 million customers during the pandemic. Kentucky Fried Chicken (KFC) also announced that it would create up to 5,400 jobs in the UK and Ireland. 

In the wider economy, the UK staged some sort of recovery in August. The economy grew by 2.1% as the Eat Out to Help Out scheme boosted restaurants. The figure was, though, below expectations and the economy remains 9.2% smaller than before the pandemic struck. UK inflation rose to 0.5% in September and Government borrowing for the month was £36.1bn, £28.4bn more than last year and the third highest since records began in 1993. 

One pinprick of light at the end of the tunnel was the UK housing market. The lifting of the Covid restrictions was said to have led to a ‘surge in mortgage applications,’ with Nationwide reporting that house prices rose at their fastest rate for five years in October. The average price of a house in the UK is now £227,826. 

As we reported in the introduction, October was not a good month for world stock markets and fears of a second wave of the virus and the consequent lockdown meant that the FTSE-100 index of leading shares had its worst month since March. The FTSE dropped 5% to close the month at 5,577 – below the 5,672 at which it ended March. 

The pound had a relatively quiet month and was unchanged against the dollar in percentage terms. It ended October trading at $1.2954. 

Brexit and Trade Deals 

The month started with the EU taking legal action against the UK for ‘breaching the withdrawal agreement.’ The Prime Minister held ‘last minute’ talks with Ursula van der Leyen, President of the EU Commission, and stated that he didn’t want a ‘no deal’ exit. 

Then the French hardened their demands over access to the UK’s fishing and the prospect of ‘no deal’ was back on the agenda. It was reported that there were ‘significant gaps to bridge’ and by the middle of the month Downing Street was suggesting that the trade talks were ‘effectively over.’ 

Meanwhile, the UK struck a deal with Australia to extend freedom of movement, and concluded a £15bn trade deal with Japan. 


As you will probably know, both France and Germany ended October back in lockdown. France had imposed a night time curfew in the middle of the month but by the end of October the major European economies were in their second period of lockdown as Covid-19 cases soared. 

Where does all this leave the Eurozone economies? There was some good news when official figures showed that Eurozone economies had bounced back by 12.7% in the third quarter of the year, although this was not enough to regain the ground lost earlier in the year. 

…And, of course, measures to protect jobs and businesses have led to a huge increase in debt. A report in the Financial Times suggested that Eurozone budget deficits had risen almost tenfold in a bid to counter the pandemic, with budgets in the red by almost €1tn (£900bn) as President Macron said that the virus would be with us “at least until next summer.” 

Let us, though, finish with Europe’s glass half full, at least for this month. City AM reported that the value of the continent’s top tech firms had ‘soared’ over the last five years, signalling ‘a golden age of tech entrepreneurship on the continent.’ European tech companies are now worth four times what they were four years ago, with their combined value jumping from €155bn (£139bn) to €618bn (£556bn). 

Sadly, Europe’s two major stock markets were more concerned with the possible long term impact of another lockdown. Germany’s DAX index fell 9% in October to close the month at 11,556 while the French stock market was down 4% at 4,594.  


October started dramatically for the President when he tested positive for Covid-19 and spent a few days in hospital. He appears to have made a full recovery and is back on the campaign trail, no doubt cheered by figures from the Bureau of Economic Analysis, which revealed that the US economy had grown at an annualised rate of 33.1% in the third quarter. This was double the previous best, recorded in 1947, and recovered the ground lost in the 2nd quarter when the economy contracted by 31.4%. 

Jobless claims also fell, although they remain at record levels. At the height of the pandemic 6.9m Americans applied for jobless benefits in a single week which is roughly ten times the number seen in the financial crisis of 2007 to 2009. 

October saw US airlines put a combined total of 32,000 staff on unpaid leave as the job recovery slowed down. Figures showed that 660,000 people found work in September but that was well below the 850,000 predicted by economists. There are plenty of people in work at Amazon, but the company revealed that 1.44% of them, nearly 20,000 employees, have had Covid-19. 

In company news, Apple launched the iPhone 12 and business is unquestionably booming for the tech giants. Apple, Google, Facebook and Amazon all reported figures on September 30th and there was one common thread: their growth shows no sign of slowing down. 

US markets were, though, influenced far more by worries about the pandemic than the rise and rise of the tech giants. The Dow Jones index closed the month down 5% at 26,502, while the more broadly based S&P 500 index was down 3% at 3,270. 

Far East 

The month’s most significant story in the Far East was China’s continuing ‘bounce back’ from the effects of the pandemic. 

As manufacturing shut down at the beginning of the year, the Chinese economy contracted by 6.8% in the first quarter of the year, the first quarterly contraction since records began in 1992. However the recovery appears to be well under way, with official figures showing growth of 4.9% for the third quarter compared to the same period last year. This was below the 5.2% predicted by economists, but still confirms China’s rapid recovery from the earlier effects of the pandemic. 

Figures for September showed that both exports and imports were up, with Chinese exports up by 9.9% and imports by 13.2%, cutting the country’s trade surplus for the month from $59bn (£46bn) in August to a paltry $37bn (£29bn). 

It was not such good news for the wider Asian economy, at least in the short term. The International Monetary Fund downgraded its forecast for this year, suggesting that the wider Asia Pacific economy would shrink by 2.2% rather than the previously forecast 1.6%. However, it expects to see growth of 7% next year, driven by the rebound in China. 

In company news Huawei continued to suffer from accusations of collusion with the Chinese government. This was good news for Samsung, which posted a net profit of $8.3bn (£6.4bn) for the third quarter as smartphone sales jumped 50%. 

Chinese technology giant Ant Group confirmed its plans for a joint stock market listing in Hong Kong and Shanghai in the world’s largest stock market debut. The company will sell shares worth $34bn (£26bn). 

On the region’s stock markets it was a quiet month for China’s Shanghai Composite index, which rose just seven points to 3,225. The Hong Kong market rose 3% to close October at 24,107, but the other two major markets both lost ground in the month. Japan’s Nikkei Dow index fell 1% to 22,977 while the South Korean market was down 3% at 2,267. 

Emerging Markets 

November was a quiet month for news in the three major emerging markets that we cover. Brazil has now had 5.3m cases of Covid-19, the third highest figure after the US and India. Despite this, President Jair Bolsonaro has overruled his health minister and said that the country will not be buying a Chinese-made vaccine which, said the President, has not yet completed clinical trials. 

As we mentioned above, India was one of only two stock markets to rise in October, gaining 4% to close the month at 39,614. The Brazilian market dropped 1% to 93,952, while the Russian index had a poor month, dropping 7% to end October at 2,691. 

And finally 

October, clearly, has not been a good month. As we said in the introduction, advisers and scientists have stood in front of graphs and here we are back in lockdown. Fortunately, there have been some lighter moments in the month.

At the beginning of the month firefighters in Hull were called to a bizarre rescue mission. Student Rosie Cole, who had been drinking wine and honey tequila, had been dared by her friends to see if she could fit inside a tumble dryer. Ms Cole gracefully accepted the challenge and climbed inside the clothes dryer. 

You know what’s coming. Ms Cole was duly rescued by the fire service. 

…But by the end of the month the Hull Fire Brigade had been upstaged by their colleagues in Essex, who had to rescue three teenagers who had crawled into an industrial-sized tumble dryer. There was no word on whether honey tequila played any part in the incident. 

The monthly market update will be back at the start of December. Following Saturday evening’s announcement it seems appropriate to send all our clients our best wishes for the coming month. Stay safe, take care of those you love and, of course, resist the honey tequila and the consequent urge to climb inside a tumble dryer…

The Chancellor’s Winter Economic Plan

Thursday, October 1st, 2020

In December 2019, the Conservatives won an 80 seat majority in the General Election and three months later, new Chancellor Rishi Sunak presented his first Budget. But by then there was a large cloud on the horizon – the outbreak of Covid-19. 

The Chancellor used his Budget speech in March to present a raft of measures to support businesses and jobs, promising to do “whatever it takes.” A week later he was back with more emergency measures and on Monday 23rd March, the UK went into full lockdown. 

Six months on from lockdown, the Treasury announced that the Chancellor’s traditional Budget speech had been cancelled for this year and instead he would present a Winter Economic Plan on Thursday 24th September.  

What has happened in the last six months? 

The last six months for the UK economy can perhaps be summarised in two words: ‘recession’ and ‘redundancies’. Figures released for the second quarter of the year – April to June – showed that the UK economy had shrunk by 20.4%. Early hopes of a ‘V-shaped recovery’ from the downturn quickly vanished.

The pandemic has unquestionably accelerated trends that may otherwise have taken 20 or 30 years to arrive. We may well all have been working from home by 2050 but this week, the Prime Minister told office workers to do it for perhaps the next six months. That will surely have serious consequences for many town centres and the ‘commuter economy’. 

These changes have, inevitably, meant widespread redundancies. Figures recently released suggest that UK payrolls shrank by 695,000 in August as the Chancellor’s furlough scheme started to wind down. 

The Chancellor’s Speech 

The Chancellor, Rishi Sunak, was at pains to stress that he’d consulted both sides of industry on the measures he was going to introduce. He was photographed before the speech with Carolyn Fairbairn of the CBI, and Frances O’Grady of the TUC. 

He rose to his feet in a suitably socially-distanced House of Commons and stated that his aim was to protect jobs and the economy as winter approached, and to try and “strike a balance between the virus and the economy.” We were, he said, “in a fundamentally different position to March.” 

Rishi Sunak said that the UK had enjoyed “three months of growth” and that “millions of people” had come off the furlough scheme and returned to work. While ‘three months of growth’ is undoubtedly true, we must remember that the economy shrank by 20.4% in the second quarter. According to the Office for National Statistics, the economy grew by 6.6% in July – but it has only recovered just over half the activity lost because of the pandemic. 

The primary goal, the Chancellor stated, was “nurturing jobs through the winter” as we all faced up to the “new normal.” He conceded, though, that not all jobs could be protected and that people could not be kept in jobs that “only exist in furlough.” 

So what measures did the Chancellor propose? 

Emphasising that he could not protect “every business and every job” the Chancellor conceded that businesses faced uncertainty and reduced demand. In a bid to protect jobs through this period, the first measure he introduced was: 

The Job Support Scheme

  • This is a six month scheme, starting on 1st November 2020
  • To be eligible, employees must work a minimum of 33% of their normal hours 
  • For remaining hours not worked, the Government and the employer will each pay one third of the employee’s wages 
  • This means employees working at least 33% of their hours will receive at least 77% of their pay 
  • The Chancellor also announced that he was extending the support scheme for the self-employed on “similar terms” to the Job Support Scheme 

Pay as you Grow 

After ‘eat out to help out’, we now have the Chancellor’s next catchy slogan: pay as you grow. 

  • Businesses which took loans guaranteed by the Government during the crisis will now be able to extend those loans from six years to ten years, “nearly halving the average monthly repayment,” said the Chancellor. 
  • There is also the option to move to interest only payments, or to suspend payments for six months if the business “is in real trouble,” with no impact on the business’s credit rating. 
  • Coronavirus Business Interruption Loans (CBILS), taken out by a reported 60,000 SMEs, can now also be extended to 10 years.
  • The Chancellor also promised a new government-backed loan scheme, to be introduced in January.

VAT Deferral 

  • Businesses who deferred their VAT during the crisis will no longer have to pay a lump sum at the end of March next year. 
  • They will have the option of splitting it into smaller, interest free payments during the 2021-2022 financial year. “This will benefit up to half a million businesses,” claimed the Chancellor. 

Income tax is deferred – but it still needs to be paid 

As we all know, death and taxes are inevitable. The Chancellor did at least delay one of them for many people…

  • He announced extra support to allow people to delay their income tax bill, which should benefit millions of the self-employed. 
  • Those with a debt of up to £30,000 will be able to go online and set up a repayment plan to January 2022.
  • Those with a debt over £30,000 should contact HMRC and set up a plan over the phone. 

The planned VAT increase is postponed 

  • The Chancellor’s final move was to give direct, targeted help to the tourism and hospitality sectors. 
  • These two sectors had benefitted from a lower VAT rate of 5%. This lower rate was due to end in January, but will now remain in force until 31st March 2021. 

What was the reaction to the speech? 

As with all Budget speeches, the reaction was mixed. Carolyn Fairbairn of the CBI praised the Chancellor for “bold steps which will save hundreds of thousands of viable jobs this winter.” 

Manufacturing group Make UK said the Chancellor ‘deserved credit’ for looking at action taken in other countries such as Germany and France and copying their successful ideas. 

The Adam Smith Institute was more cautious: the Chancellor’s plans were “sensible – but not costless.” Matthew Lesh, head of research at the free-market think tank said, “The Government must resist becoming addicted to spending. Temporary spending is sensible to keep struggling businesses afloat, but in the longer run we are going to have to get the national accounts in order.” 

There was, though, plenty of criticism, especially from the retail sector. Lord Wolfson, boss of Next, warned that ‘hundreds of thousands’ of retail jobs may now become ‘unviable’ in the wake of the crisis. “I wouldn’t want to underestimate the difficulty,” he said, “I think it is going to be very uncomfortable.” 

Where do we go from here? 

As we have commented above, six months, roughly to the end of March, now seems to be the accepted next phase of the fight against the pandemic. As people worry about whether they’ll be able to see their families over Christmas, many will also be worrying about their jobs.

In his speech, the Chancellor more than once stressed that he could not save ‘every job and every business’ and a sharp rise in unemployment through the winter seems inevitable, which will lead to more Government spending on benefits and lower tax receipts. 

The Treasury is already facing a significant shortfall and the Winter Economic Plan, although the level of Government support has been sharply scaled back, will only add to that. At some point, all the support will need to be paid for, either by increased taxes or more optimistically, a resurgent economy. 

What does this mean for my savings and investments? 

Many world stock markets have proved remarkably resilient to the pandemic and are showing gains this year. Unfortunately, the UK’s FTSE-100 index is not one of them: it ended 2019 at 7,542 and closed March as the country went into lockdown at 5,672. As we write this commentary (Friday morning), it is standing at 5,823, up 2.66% on the end of March. 

As we have stressed many times, saving and investing is a long-term commitment and, while there will undoubtedly be plenty of bumps in the road ahead, Governments and central banks around the world remain committed to an eventual economic recovery. Yes, the pandemic has accelerated trends and certain sectors of both the UK and world economies have suffered serious damage; but as we never tire of saying, new companies will find new ways to bring new products to new markets. 

We can, in the long term, still face the future with confidence but we appreciate that some clients may have understandable short term concerns. 

If you have any questions on this report, or on any aspect of the current situation, please do not hesitate to get in touch with us. 

The Chancellor has, we think, taken sensible and prudent action. As he said, “life can no longer be put on hold” and let us hope that economic activity in the UK – and the wider world – quickly reflects that. 

The emotions that arise when investing

Thursday, August 13th, 2020

Emotions are important. We should listen to them… most of the time at least. However, investing is one case when it’s best to let rational thought take priority over your emotions. By all means, listen to your emotions, but don’t be led by them.

Here’s a slightly shocking fact: In 2018, the S&P 500 generated an average return of 9.85% annually. However, research by Dalbar found that the average investor earned roughly half of that: 5.19%.

 Why? Humans are emotional creatures and investing is an emotional experience, therefore investors are tempted to make rash decisions like rapidly selling during a market downturn. 

When investing, a patient, logical approach is usually the most effective over the years. This means prioritising long-term investments over the impulse to buy and sell based on your emotions or short-term goals. 

We’ll admit that it’s hard to avoid becoming entangled in media hype or fear, something that can lead you to buying at the peak and selling at the bottom of the market, so you need to be self-aware enough to recognise when this is happening.


The cycle of investor emotions

It’s common for investors’ emotions to move in something of a cycle, similar to the one shown in the diagram below. The point of maximum financial risk lies at the top of the market curve. Here, there is the potential to make a decision motivated by short term gains, when it’s likely that the best gains have already passed.

Investors who wait until this point are often at risk of ploughing their cash into a market that might soon crash.

On the other hand, during times of rising market volatility, investors should remember the importance of looking beyond short-term market fluctuations and remember that although markets take time to recover, they usually do. If you sell during a downturn due to fear, you risk selling at the point where markets are lowest. 

You are essentially at much greater risk of being harmed by the adverse effects of ‘bad timing’ if you let your emotions get the better of you.

A better perspective

Resisting your emotional impulses isn’t easy while in the grip of a savage bear market or a raging bull. Because of the risk of long term goals being overtaken by emotionally motivated decisions, a mindset shift is necessary.

You should try to avoid thinking of your investments as immediate assets and stop dwelling on the daily fluctuations to your net worth. Rather than thinking “I lost £15,000 today” on the day of a large market fall, try to think in terms of your averages and your long term financial goals. You might have lost £15,000 on a single, awful day, such as some we saw in the ‘Covid Crash’ earlier this year. However, your portfolio might have gained £300,000 in overall value.

A balanced, long term investment strategy generally has a couple of features: 

Firstly, it takes into account that stock markets aren’t rational. You can’t rely on predicting the future of stock markets – billions have been lost on global markets to testify this. 

When looking back at stocks, it’s easy to fall into the trap of thinking “I wish I had invested at this time”. Unfortunately, it’s impossible to actually work out when the perfect time to buy or sell is when it’s actually happening. 

For instance, when markets fall, they often have small rises that form part of an overall downward slope. An investor might think that they are being smart by investing heavily in one of these ‘mini-troughs’, following the much lauded ‘buy low and sell high’ investment strategy. However, there’s no way of knowing for certain that this is actually the lowest point on the stock market. It might just be a momentary trough as part of a much steeper decline.

Another approach could be to consider ‘drip-feeding’ your money into investments, a strategy known as Pound Cost Averaging. 

Secondly, stronger investment portfolios tend to be diversified. There’s that old saying about not putting your eggs in one basket. Investing all your money in one place makes you far more financially vulnerable if those stocks crash. 

A stronger investment strategy would spread your money through different asset classes and different assets within each asset class. 

Whatever investment strategy you use, it’s best to try to gain a bit of emotional distance from your investments. Understanding what emotions you’re likely to be feeling is a good way to enable you to make effective decisions, but don’t let these emotions rule you. Please get in touch if you have any questions about this article.


The world is in recession. Why is the stock market rising?

Thursday, August 13th, 2020

Current World Bank forecasts indicate that the Covid19 recession will be the deepest since WWII and the Treasury’s forecaster has suggested that it could take until the end of 2022 for the British economy to return to its pre-coronavirus peak.

However, global stock markets seem to tell a more positive story. Markets are rallying across the world and have been so doing since their mid-March trough, with the US stock indexes leading the charge. Today, some markets – like the S&P 500 – are close to fully erasing their recent losses.

February and March were difficult months for stock market investors – with the sharp declines the markets were showing and wider economic chaos, sleepless nights were aplenty. Since then the stock markets have generally been positive. Many investors’ portfolios are close to their pre-coronavirus levels.

The divergence between economic news and stock market performance

While stock markets are closely related to the economy, they are not the economy. 

Stock investors look forward, beyond present conditions, into the future. And at the moment they are taking an optimistic view.

There are several reasons for this. 

Firstly, governments have responded with large economic stimulus packages. In Britain, we have had the furlough scheme, loans to support businesses and support for the self-employed. More recently, Rishi Sunak announced a further support package worth up to £30bn, which included measures to protect jobs, help younger workers and encourage spending.

As long as governments continue to support the economy, many investors will be willing to look beyond adverse economic headlines. 

Secondly, the medical news around coronavirus is a bit of a convoluted story, but one which does show promising signs for investors.

While the virus seems to be continuing to wreak havoc around the world with more cases and fatalities each day, the news appears to be reasonably positive on vaccine development and other treatments. If a vaccine is available for mass distribution in early 2021, life may return to normal sooner than expected. 

However, it’s not a foregone conclusion that the stock market surge will last. 

A second wave of coronavirus could require countries to implement stricter social distancing measures that would further dampen consumer spending. And there’s a chance that global finance ministers will not be able to extend the kind of economic support measures offered during the initial lockdown. 

Events like these would likely damage investor confidence in the future, causing stock markets to fall once again.  However, given the fact that many major economies are making a ‘V-shaped’ recovery,  we’d say the prospectus for investors is positive.

August Market Commentary

Thursday, August 6th, 2020


If there was one word that characterised July, it was tension. Tension between Beijing and Hong Kong, tension between China and the US, and tension between China and the UK over Huawei. 

The UK made a citizenship offer to up to 3m Hong Kong residents and duly suspended its extradition treaty with Hong Kong. The US indicted two Chinese hackers for spying and President Trump is expected to take action against Chinese software, including the hugely popular TikTok, ‘within days.’ 

In the UK, July brought us Chancellor Rishi Sunak’s Summer Statement as he continued the fight against Covid-19. We report below on a sharp drop in US GDP in the second quarter. The UK figures will also make for grim reading when they are released and we can surely expect another round of stimulus measures when the Chancellor unveils his Autumn Budget. 

The Chairman of Microsoft said that the world faces a “staggering jobs challenge” with up to 250m set to lose their jobs this year. If Covid-19 has done one thing it is to accelerate economic changes we have long been writing about – another headache for Rishi Sunak as the furlough scheme in the UK starts to wind down. 

World stock markets had a mixed month in July: there were some remarkably good performances, although the UK’s FTSE index had a poor month. With Covid-19 cases in the US continuing to rise, the dollar suffered its worst month for more than a decade. 

As always, let us look at the details…


On 8th July – almost four months to the day after his March Budget speech – Chancellor Rishi Sunak delivered his Summer Statement. 

The Chancellor announced a “£30bn plan for jobs.” The country would, he said, be defined “not by the crisis, but by how we respond to the crisis.” 

As the Chancellor waits to see how the economy begins to recover before he unveils his Autumn Budget, the Summer Statement will act as something of a holding measure.

In the meantime, he will have plenty to ponder on. With the furlough scheme now gradually coming to an end, the job losses continue to mount, with 12,000 jobs going in two days at the beginning of the month and estimates at the end of July suggesting that lockdown has cost pubs and restaurants £30bn of turnover. 

More worrying, perhaps, are suggestions that many firms which might otherwise have folded have been artificially kept afloat by loans and grants from the government. The rate of insolvencies has slowed since March, but the Institute of Fiscal Studies is suggesting that many of these ‘zombie companies’ will struggle to repay the new debts they have incurred. 

Car production in the UK slumped to its lowest levels since 1954 and although consumer confidence edged up from its record low, confidence among small firms declined sharply. More than a fifth of the UK’s small firms expect their performance to be “much worse” over the next three months, with 75% of firms reporting that their profits fell in the last three months, up 33% on the same quarter last year. 

Optimistically, the Bank of England is now suggesting that an “uneven” recovery has begun. There seems little doubt now that the supposed ‘V-shaped recovery’ will not happen, and that some sectors of the UK economy will continue to struggle for some time. The latest research is suggesting that shareholder payments via dividends could take six years to recover. 

As we reported above, there were tensions between the UK and China over Huawei’s involvement in the country’s 5G network, and this led to inevitable counter charges from China and threats of reprisals against UK companies. 

With all of this news, it was hardly surprising that the UK’s FTSE-100 index of leading shares fell in the month. It was the worst performing of all the markets on which we report, dropping 4% in July to end the month at 5,898. 

With the dollar having its worst month for ten years, the pound rose sharply against it and ended the month up 6%, trading at $1.3098. 

Brexit & Trade Deals 

You may be familiar with the Sherlock Holmes story ‘Silver Blaze’ and Holmes’ famous quote that ‘the curious incident was that the dog did nothing in the night.’ 

July was virtually a ‘curious incident’ month for Brexit and any subsequent trade deal with the EU. With all attention still focused on Covid-19 and several of the leading participants due to go on holiday, August may well follow suit. 

There are now five months to go until the UK leaves the European Union, and it is looking increasingly likely that it will be without any formal deal. In the middle of the month, the Guido Fawkes political blog reported that both major trade deals – with the EU and the US – are ‘expected to miss their deadlines and not be concluded by the end of the year.’ 


On 17th July, Europe’s leaders met to try and thrash out a post-Covid-19 recovery deal. Hopes prior to the meeting were, apparently, ‘not high.’ 

The talks went into a fourth day but – after Europe’s longest meeting since 2000 – the objections of the ‘frugal four’ (the Netherlands, Austria, Sweden and Denmark) were overcome and a deal was eventually reached. 

Some hailed it as a victory for closer European integration but it is fair to say that there were also plenty of sceptical voices arguing that the North/South rift in the EU had widened and that the extra spending commitment – estimated at €1.8tn (£1.6tn) over the next seven years – was unsustainable given the expected contraction in the European economy.

We have written above about the decline in the UK car industry: sadly that is a pattern being repeated right across Europe, with German car production falling by 44% in the first five months of the year and 100,000 jobs thought to be at risk. 

The German economy shrank at its fastest rate on record in the second quarter, declining by 10.1% between April and June – the sharpest fall since Germany began producing quarterly figures in 1970. 

On the stock markets, it was a very quiet month for the German DAX index which rose just two points in the month to close June at 12,313. The French market fared less well, falling by 3% to end the month at 4,784. 


The month started well in the US – figures showed record jobs growth in June as firms started re-hiring and 4.8m jobs were added – but all the news in the month was overshadowed by the second quarter figures. 

The US economy suffered its worst ever fall in the April to June quarter, with GDP falling a historic 32.9%. You could put a positive spin on the figures by arguing that the consensus among economists had been for a fall of 34.7%, but the simple fact is that neither the Great Depression nor any other slump in the past 200 years has seen such a sharp contraction in the US economy. 

The figures, “just highlight how deep and dark the hole is that the economy cratered into,” said Mark Zandi, chief economist at Moody’s Analytics. 

At the end of the month, Republicans in the Senate proposed spending a further $1tn (£769bn) to help fix the ‘hole,’ with proposals including $100bn (£77bn) for schools and a stimulus payment of $1,200 (£923) to most Americans. The US has already spent more than $2.4tn (£1.85tn) in virus relief measures. 

The Federal Reserve duly repeated its vow to protect the US economy, but admitted that the long term health of the economy was bound up with the long term path of Covid-19. This continued to suppress domestic demand through July as individual states imposed renewed lockdown measures. 

In other news, Tesla overtook Toyota to become the world’s most valuable car maker as its shares rose again. The US stock market duly took its lead from Tesla rather than the bad economic news. The Dow Jones index was up 2% in July to 26,428 while the more broadly based S&P500 index rose 6% to 3,271. 

Far East 

July in the Far East – leaving aside the tensions over Hong Kong – was, perhaps, a tale of two companies and the impact lockdown had on them. 

At the end of the month, Japanese car maker Nissan warned of a record loss. The company said that the virus had hindered its ‘turnaround’ efforts, with sales slumping by 48% in the April to June period. It estimated the loss for the year at £3.5bn, with its shares unsurprisingly falling 10%. 

It was exactly the opposite story in South Korea as Samsung’s sales soared on the demand that has been created by working from home and home schooling. The world’s largest maker of smartphones said second quarter profits were up 23% on last year, with the results helped by strong demand for computer chips. 

If the news in July was bad for Nissan, it was also bad for the wider Japanese economy, which went into recession. Household spending in May was 16.2% down on the same period in 2019, the sharpest rate of decline since comparable data began in 2001. 

Despite the good news from Samsung, the South Korean economy was also in recession, with exports – which account for 40% of the economy – at their lowest level since 1963. 

We have already discussed the tensions surrounding China: those don’t appear to be reflected in the Shanghai Composite index which rose 11% in the month to close July at 3,310. The South Korean market also defied the bad news, climbing 7% to 2,249. The Hong Kong market posted a more modest 1% rise, closing at 24,595 while Japan’s Nikkei Dow index was down 3% to 21,710. 

Emerging Markets 

It was a quiet month for news in the emerging markets we cover in the market commentary. The most noteworthy event occurred in Russia, where Vladimir Putin effectively became ‘President for Life.’ 

In a referendum – held over seven days because of Covid-19 – nearly 80% of voters apparently backed an amendment to the constitution which will allow Mr Putin to run for two more terms as President. He had been due to stand down in 2024, but will now effectively remain President until 2036, when he will be 83. 

July was a good month for Mr Putin and a very good month for the three major emerging markets on which we report. The Indian stock market rose 8% to 37,606 and Brazil’s market was up by the same percentage to 102,912. The Russian stock market rose 6% in the month, ending July at 2,912. 

And finally 

There cannot be anyone reading the market commentary who has not now heard the term ‘social distancing’ – or noticed its inevitable impact on sporting events. 

One such event to suffer from a lack of spectators was July’s hot dog eating contest in the US. Every year thousands of people flock to Coney Island for this great sporting contest. They pack the beach in their thousands, cheering on the competitors. 

Until this year…

This year, of course, the hot dog eating contest had to be socially distanced and was duly held indoors. The good news is, despite the lack of support, records were broken in both the men’s and women’s categories. Winning the men’s contest for the 13th time, Californian Joey “Jaws” Chestnut swallowed an impressive 75 hot dogs in ten minutes. Miki Sudo, from Connecticut, won the women’s title, downing 48½ hot dogs. 

Speaking after the contest, 36 year old Mr Chestnut said, “One of the best things about this contest is the energy the audience brings. There’s been years when I don’t feel my best and the audience pushes me.” 

Also clearly not feeling their best – although possibly not from eating 75  hot dogs – were staff at the Met Office, who mistook a huge cloud of flying ants for rain. In a tweet, the confused Met Office wrote, “It’s not raining in London, Kent or Sussex – but our radar says otherwise.” 

Finally, figures were released during July showing that we spent £40.6bn trying to cheer ourselves up during lockdown, with consumers spending an average £771 each. As you’d expect, takeaway food and alcohol were high on the list, but Barclaycard also revealed that consumers bought an inflatable pub, a penny farthing and an antique diving suit. 

With the weatherman telling you it’s going to be raining flying ants, who wouldn’t want to climb into an antique diving suit? 

What is the value of advice?

Monday, July 13th, 2020

You’re not going to be surprised that, as advisers, our firm belief is that an advised client will get a better financial outcome than a non-advised client. How to prove, though, that we’re not just biased? What is the actual value of that advice? How can it be quantified?   

Most importantly, the value of advice is not simply tied to fund picking or performance.

A good example of this was when the FTSE 100 fell by over 26% in early March due to panic over the coronavirus outbreak and some advisers chose to move their clients’ investments out of equities into assets, traditionally viewed as ‘safe havens’. Although they may have moved them back into more equity-dominated funds in April, the FTSE 100 actually made its biggest recovery between 23 and 26 March so their clients’ money would have been out of the market at the optimum time. This is a clear sign that adding value by trying to ‘time the market’ does not work.

Advice, in our view, goes much further. It can cover: 

  • Behavioural coaching
  • Spending strategies
  • Portfolio rebalancing 
  • Tax-smart recommendations
  • Financial planning  

It’s all part of building a long-term relationship where the adviser really gets to know the client and understands their objectives for life.    

Behavioural coaching, in particular, can be useful in helping an investor to ignore market noise and to keep their emotions at bay so that they avoid expensive mistakes and stick to their long term goals. 

Research over a number of years by the International Longevity Centre (ILC) showed that using a financial adviser led to better financial outcomes in the following ways:

  • Taking advice added £2.5bn to people’s savings and investments,
  • The pensions of clients who received ongoing advice were worth 50% more than those who took one off advice. 
  • Those who took advice were likely to be richer in retirement.
  • The benefits of advice outweighed any costs associated with it 

In addition, the University of Montreal estimated that clients with an adviser would have a 2.73 times larger savings pot over a 15-year period than clients who hadn’t seen an adviser. If that time frame was reduced to five years, the savings pot would still be 1.58 times greater. 

Different investment companies quote different figures but on balance agree that advisers can generate between 3% and 4.4% per annum net returns for their clients.      

Set against this backdrop, it would seem financial advice does have a real value to offer.   

July markets in brief

Thursday, July 9th, 2020

As much of the West continues to tentatively emerge from months of lockdown measures, June has been an altogether more positive month when it comes to economic news. All the markets we report on rose during the month.

The global Black Lives Matter movement and the new Hong Kong security law usurped Covid-19’s position as the headline item on global media outlets for much of June, a sign that perhaps we are beginning to emerge into a ‘new normal’.

However, recent resurgences of Covid-19 in California, Texas and Florida demonstrate just how tentative this emergence must be.  Meanwhile, the virus continues to ravage much of the developing world, with a recent surge of cases in South Africa and other African countries.


Unsurprisingly, most of the bad news came from the retail sector. Figures published in early June saw sales fall by 5.9%, in spite of the fact that many shops had moved online. Estimates suggest that around £2.15bn of commercial rent was unpaid for the quarter ending in June. Shirtmaker TM Lewin was the high street’s latest casualty, as it moved all sales online at the cost of 700 jobs.

However, there was positive news aplenty. Speaking on 30th June, Bank of England economist Andy Haldane announced that the UK economy was still on course for a quick, V-shaped recovery coming “sooner and faster” than expected. 

On the back of this, at the end of June, Boris Johnson announced his ‘New Deal’ worth £5bn, evoking President Roosevelt’s New Deal of the 1930s, a massive infrastructure spending designed to drag the US out of the Great Depression. Roosevelt’s deal was worth around 40% of the US GDP in 1929. By comparison, £5bn amounts to a more modest 0.2% of current UK GDP – not quite on the same scale.  

The FTSE100 rose by a modest 2% during the months closing at 6,170. And the pound was unchanged against the dollar, ending June at $1.2388.


All was relatively quiet on the continent from a news point of view. The European Central Bank (ECB) raised no alarm bells when it cut its growth forecast for the year. It now expects the Eurozone economy to contract by 8.7% this year. 

The ECB was again active in boosting the Eurozone economies, ramping up its quantitative easing programme by €600bn to a whopping €1.35tn, extending the programme to June 2021, six months later than originally planned.

Unsurprisingly given the economic turmoil, there were significant job losses. Airbus announced that it planned to cut 15,000 jobs across Europe, only to be expected in a year that has been the worst on record for the aviation industry.

Both major European stock markets we report on had strong months. The German DAX index rose by 6% to 12,311 while the French stock market was up 5% to 4,936. 


The US’s unemployment crisis continued in June. Despite the good news that the US economy had added jobs in May as measures were released in many states, a further 1.5 million people had filed for unemployment benefit. There are now 44.1 million Americans claiming unemployment support.

Like every other major economy, the US is now officially in recession. This means the end of a decade-long period of economic expansion. The Fed duly reminded US banks to ‘stay prudent’ as it warned that they could suffer losses of up to $700bn if the pandemic led to a sustained economic crisis.

As in the UK, the American retail sector suffered. Gap posted a $923m loss for the three months to May, compared to a $227m profit for the same period last. 

Despite a spike in virus cases towards the end of the month, the Dow Jones ended the month up 2% at 25,813. From this month forward, we will also report on the more broadly based S&P index, which closed June at 3,100.

Far East

June ended with China passing the controversial Hong Kong security law. The law gives Beijing wide ranging powers over Hong Kong. The law states that anyone who conspires with foreigners to provoke “hatred” of the Chinese government could have committed a criminal offence. Many are worried that this law could make criticism of the Chinese government ilegal. 

The security law wasn’t the only point of controversy from China during the month. There was escalating tension between India and China and there were clashes in a Himalayan border region, with reports suggesting that up to 20 Indian troops had been killed. A rise in tensions between the world’s two most populous countries is a real cause for concern.

And if this wasn’t enough disruption, Australian Prime Minister Scott Morrison said that the country had been the victim of a “sophisticated state-based cyber hack” and many commentators quickly pointed the finger at China.

On a more positive note, the UK opened trade talks with Japan. The region’s markets seemed to respond as if improving bilateral relations were the trend across the region, when in reality the opposite was true.

China’s Shanghai Composite index rose 5% to 2,985 and the Hong Kong market did even better, climbing 6% to 24,427. The South Korean market was up 4% to 2,108 and Japan’s Nikkei Dow index gained 2% at 22,288. 

Emerging Markets

As we write this, on 2nd July, Vladimir Putin has just won a controversial vote to amend the constitution. Importantly, the vote means that Putin’s term limits have been reset, potentially allowing him to rule as president until 2036.  

The Indian economy seems to be rebounding rapidly in the wake of its lockdown which was released on 1st June. Figures suggest that goods movement is close to pre-lockdown levels.

On the other side of the Pacific, Brazil became the second country to reach 1 million cases of Covid-19, and experts have said that Brazil could ultimately become the country worst hit by the pandemic.

Both the Indian and Brazilian markets enjoyed excellent months. The Indian stock market rose 8% to end June at 34,916, while Brazil went one better, gaining 9% to 95,056. In contrast, Russia, the other major emerging market on which we report, had a subdued month and rose just eight points to 2,743. 

Whether you’ll be enjoying that first refreshing pint in a pub or having a much needed haircut, we hope that you have a great July. Please get in touch if you have any further questions around this commentary.

5 key points for becoming financially independent

Wednesday, June 24th, 2020

Financial independence can seem like the holy grail. We may be striving towards it but feel bombarded by lots of conflicting messages on how best to attain it. These five points give an interesting perspective:    

Income is not the same thing as wealth

Having a high salary can help you accumulate wealth but that’s no good if you’re still spending more than you earn. That’s why you might hear of a professional footballer earning £30,000 a week going bankrupt while a bus driver, who’s saved diligently all his life, can retire a multi-millionaire. To avoid the spending trap, remember your real wealth or net worth is the amount on your balance sheet – your assets minus your liabilities.

Regardless of what your income level might be, try and achieve financial independence by thinking long term. What goals can you put in place regarding your career plans, your investments or any property you may have?        

Create surplus funds

To take advantage of any investment opportunities, you need to have sufficient money to invest, and to be successful in investing, you need to reach a critical mass. At this point, the returns generated on your savings will have more impact. For example, a 10% return on £10,000 would give you £1,000 before tax, while the same return on a portfolio of  £1,000,000 would give you £100,000 for the same amount of effort and research.

Amassing wealth is a gradual process but through small steps to cut expenses or generate income, it can amount to something over time. When the interest your money has earned starts to earn interest too, that’s when you’ll really start to notice the difference. This is where the power of compounding comes in. It also means you can invest more the next time an opportunity comes round and so on.     

Taxes have an impact

Think carefully about where you hold your assets. Remember not all income is treated the same. You may have a great deal of wealth but be generating a lot of taxable income, while someone who has attained their goal of financial independence may have maximised their capital gains allowance and done some tax-efficient retirement planning.

Take control of your time

Your definition of financial independence may be being in charge of how you spend your time each day. Enjoying what you do for hours on end can be better than any financial return. So while you may not have quite reached your ultimate investment target of maintaining your ideal lifestyle without a monthly paycheck, having the freedom to spend your time how you want is worth a great deal.             

Promote the same values

Becoming financially independent is easier if the rest of your family shares the same goal and beliefs. Does your husband or wife have a similar attitude to saving, investing and risk as you?     

Encourage your children to grow up to be financially independent and manage their own money. Offer them support but don’t let them grow up always expecting a financial hand-out or free board. You’ll never gain financial freedom and neither will they.     


June Markets in Brief

Wednesday, June 3rd, 2020

May saw a more positive month for most of the stock markets we discuss, despite the COVID-19 pandemic taking centre stage across the globe. India and Hong Kong aside, all major stock markets made gains during the month. 

The world is tentatively beginning to emerge out of lockdown and there are some signs that the engines of the world’s economies are beginning to restart. These might serve as some consolation for concerned investors, which – given the current crisis – must include anyone with stocks, shares or an invested pension.

However, it must be emphasised that we are still far from a fully fledged economic recovery. Although there are some promising signs, like early flowers in Spring, these signs could be quickly killed off by the economic frost that would result from a second outbreak of COVID-19. Away from the stock markets, the global unemployment crisis deepened to depths not seen in living memory and many large firms remain just a rescue package away from collapse.


The UK continued its economic stimuli policies during the month as it “fought back” against the global pandemic. Rishi Sunak announced that the furlough scheme would be extended until October, although companies will be asked to contribute an increasing amount to the cost. 

May saw the return to work for many after Boris Johnson announced the gradual easing of lockdown restrictions on 10 May. However, the high street remains closed for ‘non-essential’ shops until 15 June, and the possibility that consumers – in the words of M&S boss Steve Row – “may never shop the same way again.” Lifestyle retailer White Stuff were among the latest to announce significant job cuts over their 120 UK stores.

There have already been many job losses across the country and there are expected to be many more as the furlough scheme winds down. Boris Johnson has hinted at a post-crisis jobs programme which would create “high class jobs for the country”; the success of such post-crisis recovery strategies will be vital as the country emerges from the crisis. 

The FTSE rose by a promising 3% during the month to end up at 6,077, and the pound fell by 2% against the dollar to close the month at $1.2343.


The economic picture across the channel certainly wasn’t a rosy one. During the first quarter, the Eurozone economy contracted by 3.8% and the European Commission forecasted a “deep and uneven recession.” 

There was plenty of grim company news. Renault announced 15,000 job losses around the world, despite the French government’s announcement of an €8 billion rescue package for the car industry. Elsewhere, Nissan closed its Barcelona plant with 3,000 jobs lost.

In spite of all this bad news, the continent’s major stock markets both finished up, possibly bolstered by the €750 billion EU rescue package announced during the month; the German DAX was up by an impressive 7% to 11,587 and the French stock market rose 3% to 4,695.


The world’s largest economy suffered a tough month. By the end of May, nearly 40 million Americans were claiming unemployment benefits and Jerome Powell, Chairman of the Fed, announced that the economy could contract by 20-30% during the crisis. 

General Electric announced massive job cuts that could amount to 16,000 jobs and car rental firm Hertz filed for bankruptcy protection after the pandemic caused demand to “collapse”.

Declining retail sales and a record fall in manufacturing output have fanned the flames of this hard economic picture. However, there are faint signs of optimism that new economic opportunities will emerge for innovative firms after the crisis. Thankfully, America’s stock markets echoed this optimism rather than the discouraging headlines. The Dow Jones index enjoyed a good month and rose by 4% to 25,383.

Whatever you’re planning to do in June, we hope you have a pleasant month. In spite of the gloomy news and uncertainty, in May the UK enjoyed the sunniest calendar month on record. We hope that this fine weather continues during June and that you’re able to make the most of it, even if it’s just from the comfort of your garden.