Weekly update, 12th June 2020
We take a look at GDP figures released today, investigate how climate change is rising up the public agenda, and see how World Oceans Day has been marked.
The latest UK Gross Domestic Product (GDP) figures, released this morning, have shown that the British economy contracted by 20.4% in April, the largest ever monthly decline1. This represents a three-month fall of 10.4% and suggests that the UK economy is roughly 25% smaller2 than it was in February. It is difficult to comprehend the true magnitude of these figures. Almost all areas of the economy have been affected by the lockdown measures that have been put in place, with construction seeing a contraction of 40.1% in April alone3. Despite these figures being eye-wateringly large, this was expected. After much of the economy ground to a halt, the economic impact is now slowly coming to light, after being somewhat postponed.
On Wednesday, the US Federal Reserve (‘the Fed’ is the US equivalent of the Bank of England) warned that the US faced a long road to recovery. Their comments lead to a pullback in the stock markets which had almost recovered the losses from the crash earlier in the year4. The Fed has forecast that the US economy will contract by 6.5% in 2020 with a rebound expected the following year – which is not an unlikely scenario, considering the huge contraction we are seeing presently.
It is moments like this, when GDP figures are the worst ever reported, yet the stock markets are positive for the day, that you wonder ‘what on earth is going on?’. It is worth remembering that the stock market is not the economy and vice versa. Although stock markets replicate a certain portion of economic activity, they do not account for all of it. The unprecedented amounts of stimulus and support that businesses and the people have received, not just from the central banks but through governments, have led the stock market to rally, creating a larger disconnect from the economy than before. It is important to note that the recovery may take significantly longer than recent stock market performance has suggested. Now, more than ever, holding a diversified multi-asset portfolio and not trying to time the market is the right thing to do.
Over recent weeks, our updates have touched on the importance of considering climate change as we plan for the return to a new, post-COVID 19 normal. It seems we are in the majority, with a recent Ipsos Mori poll indicating that 66% of Britons believe that the seriousness of climate change compares equally to coronavirus. However, it should be noted that British respondents were less likely to believe this is the case than participants from other countries. Whilst two-thirds of the British people asked were likely to agree that climate change poses a serious threat, this compares to 71% on average across the 14 countries surveyed5. Nevertheless, the poll indicates that policy is currently lagging behind public opinion on the issue, as appetite grows for a strategy that will map out a safer, more environmentally resilient road to recovery6.
Monday the 8th of June marked World Oceans Day, an event calling for the protection of vital ecosystems on which our blue planet relies7. Threats of pollution and over-exploitation mean that only 4% of the oceans are estimated to remain unaffected by human activity8. Despite the pandemic, people around the world participated in beach cleans and other actions in efforts to reverse the damaging impacts we’ve had on the natural world9. Events such as World Oceans Day serve as an important reminder of the conservation work needed to protect the important natural areas providing the essential ecosystem services that humanity needs.
Whilst 2020 has not been the year that many of us expected, we have been working hard at Holden & Partners to put your needs and satisfaction at the heart of our ethical financial planning and investment services. We are launching a new strapline to convey our values, ethos and forward-thinking approach. Above all, we want it to express the importance we place on our relationships with our clients and the environment. We hope that you agree….
Our new strapline:
‘Planning for a Sustainable Future’
We look forward to continuing to work with you, building a future that is sustainable, healthy and inspiring.
We have received lots of positive feedback about our weekly updates. If you’ve found them useful and informative, we would be delighted for you to share them with friends, family and work colleagues. We are always keen to spread the word about our unique approach to financial planning and investing.
2 https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/april2020
3 https://www.theconstructionindex.co.uk/news/view/construction-output-down-40-in-april
8 https://oceana.org/what-we-do
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