McHardy Financial Update - 22 May 2020

May 2020

We are approaching the 10th week of lockdown and it has been a challenging time for all. At McHardy Financial this period has not gone without its trials for our staff and our back office systems. On behalf of the directors I would like to put on record our thanks for the efforts, commitment and flexibility of all our staff during this period.

Our Advisers and their support remain committed to your needs and our offices are checked regularly (in a safe manner) for mail. Our advisers can all be contacted on their mobiles and our office numbers remain open albeit remotely.

Your regular review meetings continue and our Advisers are using Zoom, Teams and the old fashioned phone method to carry these out. We are also continually working with our various third party providers of your financial arrangements to make things easier for you to carry out transactions and maintain a high level of service.

Later next week, in Scotland, we will start seeing the easing of lockdown measures. Similar relaxation of the rules have been in place in England for over a week. Whilst I’m sure this is a welcome development for everyone it will still feel a long way from ‘normality’.

Here’s a brief outline of recent developments in markets and economic indicators:

Global Equity markets, albeit still showing high levels of volatility, have bounced back over recent weeks making up large chunks of the significant losses in the first quarter of the year. Since 1 April 2020 the FTSE 100 has seen a rise of 8.70% whilst the Dow Jones has seen a rise of 16.90%. Massive global Government stimulus, a relaxation of lockdown measures and earlier this week we saw positive news coming out a US pharmaceutical regarding vaccine development, have all had an impact on these indicies. The large Tech-based sector in the US has had a positive impact on markets across the pond as they weather the financial storm in better shape than more ‘traditional’ companies.

This week has seen the rise of discussion and speculation regarding negative central bank interest rates. The US Fed has adamantly stated that zero is a ‘hard limit’ and will not be breached. The Bank of England has not been quite so dismissive. Andrew Bailey, the Governor of the Bank of England has declared it ‘foolish’ to rule out any tool to help the economy and avoid a deep protracted recession. Whilst this would be a further blow to savers, it would be a likely be a boost to investors and business with the opportunity cost of holding cash increasing. It should be noted that this week the Government sold a UK Government Bond with a negative yield, that is investors leant the UK Treasury some £3.8bn with a yield of minus 0.003 per cent, giving them slightly less at maturity than their initial capital.

UK Government Debt has increased to its highest monthly figure on record, according to the OBR. This expected development is the cost of the government support through the coronavirus pandemic through jobs schemes and loans. Of the £62.1bn borrowed in April, £14bn was made up through the UK furlough scheme, the most costly government policy of the crisis. It should be noted that the recent government gilt sale was heavily oversubscribed therefore investors’ appetite in UK Government debt is still strong despite a significantly larger balance sheet.

Covid-19 cases throughout the UK have been on a downward trajectory for a period of time now with the US on a similar path. The ONS also released a study on Thursday, believing one in twenty of us in the UK have been exposed to the virus whilst one in six have been so in London. With a rollout of Antibody tests finally set to go ahead in the coming days further information on the position the UK finds itself in should become clearer.

The UK Government has also announced a rollout of testing which can be completed in 20 minutes. Such developments, together with the planned contact tracing should all improve the UK’s armoury in fighting this virus.

Our offices are closed on Monday 25th for the Bank Holiday. I hope you all have a pleasant weekend and stay safe and well.

Kind Regards,

Richard Fletcher

Director

Chartered Financial Planner