The return of lockdown across the UK came as an unpleasant reminder that Covid is a killer, and that the epidemic is still far from over.
But what will the effects be on the economy this time – and how will investments be affected?
The financial impact of lockdown
The first lockdown in March caused unprecedented disruption, with jobs and incomes vanishing overnight, banks shutting up shop and millions of people forced to delay mortgage and loan repayments
Stock markets crashed with the FTSE 100 falling 25% in February and March.
The government set about providing support, with a series of loans and holidays on VAT, mortgages and business rates. Together with the furlough scheme to support jobs, their efforts were at least partly successful as most people had jobs to come back to when the lockdown was eased.
But now lockdown is back, and many of the sectors and businesses that managed to scrape through the last round may not be in a position to do so again.
Lockdown could be the last straw for some businesses – but others will have been given a huge boost by the unprecedented new trading conditions.
It may be time to look at your investment portfolio, and see which sectors will thrive and which will not.
The retail sector should be ramping up for its busiest time of year. But high streets were emptying even before Covid, and the lockdown which prevents ‘non-essential’ shops opening now could mean that many will never open again.
Laura Ashley, Brighthouse, Cath Kidson and Debenhams are all in administration. Survivors, such as Marks and Spencer which posted its first ever loss, have seen profits tumble. Shoppers have been forced to switch to buying online, and many now seem to prefer it.
This means that online retailers may thrive. Companies like Amazon, and Farfetch in the fashion sector are booming. Together with the logistics companies providing round the clock delivery of everything from groceries to homeware they could be benefitting from a permanent change in buying habits.
Leisure, hospitality and manufacturing
The hospitality sector was steadily reopening, with nearly 20,000 sites opening again over August and September, but the new lockdown means an abrupt end to recovery. Industry experts believe that more than 5,000 pubs could remain closed forever.
The government is keen to support UK manufacturing, and UK manufacturing activity beat expectations in October as the sector expanded for the fifth month running.
However, setbacks are likely. Concerns about risks posed by the pandemic, changes to Covid restrictions and stimulus measures, plus Brexit anxieties continue to put the brakes on many manufacturers.
The impact of the vaccine announcement
The announcement of a Covid vaccine on Tuesday November 10th had an immediate effect on markets. As might be expected, the company responsible, Pfizer enjoyed an immediate boost in share prices, and the sentiment of many sectors turned positive.
With news about a vaccine, it could be that the global economy may see the first hints of recovery, even if we are not out of the Covid crisis yet. With Brexit still an unknown quantity, some commentators are suggesting steering clear of smaller UK businesses, and looking at global investments. The recovery in China, for example is already well underway.
However, much of the bad news around the new lockdown is already priced in. It could be time to simply spread and diversify rather than trying to second guess stock market movements.
The FTSE 100, and indices around the world may all show growth over the next few months if the world emerges from Covid and reviewing your investment position may be a suitable thing to do.
Of course, your own investment decisions need to be based on your own circumstances and plans. Getting the support of an investment expert may be vital to enjoy the real rewards of the recovery, and the simplest way to secure it is to call us at Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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