Kicking the ball down the road

I hope that this update finds you keeping safe and well.

Following on from my last update as we all expected back then the end of lockdown was moved 4 weeks forward.

Forgive the pun with the football in full swing but it certainly feels as if the ball has been kicked down the road.

With the announcement on Monday of us returning to normal on the 19th it does seem that these targets will be met. I appreciate that the case numbers ticking up isn’t the outcome that anyone wanted, but it appears that the line has been drawn in the sand.

I did want this update to be toward a more normal background, but I think we can all see now that will not be the case for some time yet. Living with the virus is now the message and one in which we will all have to factor in at all times.

In my last update I did comment on how or what would happen in the markets if the lockdown date was moved and what we did see was no effect on our domestic market.

What we saw on the Tuesday morning following announcement was a positive market bounce based upon better-than-expected jobs data.

With a recent holiday in Lyme Regis what is clear to see is that there is a real need for hospitality staff seeing as this sector is now firmly open. 

The jobs market will also see an increase in activity with the work from home notice now also officially coming to an end on the 19th.

The concern for industry is that with less workers available due to travel restrictions then this will mean higher wages to attract staff. We see this now in some sectors where incentives are offered to move. This does place great pressure on business seeing as this eats into the profit margins which we all crave for in our portfolios.

Inflation is moving upwards as reported in my past updates and we can see this pattern a lot easier now below.

February           0.4%

March               0.7%

April                 1.5%

May                  2.1%

This is now at the highest it has been for 2 years, and we expect to see when released the June figure being even higher.

So, as we can see that the pound in the pocket is losing its buying power.  This isn’t a runaway train by any stretch, but it will add pressure on the Bank of England to look to increase the central rate.

Historically this is how we balance inflation with an increase in rates, but we do see both consumers and businesses now basing all their futures on super low interest rates.

Businesses did have the option of a bounce back loan, and this was available up to £50,000 or 25% of turn over, with no or very few questions asked. The first 12 months was payment and interest free with payments started 12 months after.

Roll forward to now and these payments will have to now commence. Talking with a corporate banker this week he expects as many as 25% of the loans to never be repaid and he believes that to be an optimistic view. This without doubt is a disaster waiting to happen, but these loans are underwritten by the government.

I’m really keen to look at this date when its released and see what the repayment and default figures are.

We have seen positive markets now overall for the opening 6 months of this year, but I do very much expect a bump in the road here and there. The UK is still a little undervalued and there are some interesting areas of opportunity.

Don’t forget we are still battling on with Brexit and our financial future looks to be very firmly in our own hands.  

Final thought with inflation, on holiday in Lyme Regis I ordered a beer, which to my horror was £6.25 a pint.

I appreciate that in the modern world that prices will increase but outside of central London this might well be the most expensive beer I have ever brought.

I wish you all a happy summer staycation and if you wonder to the Dorset coast, makes sure you see the prices first!