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The World In A Week 53 – Keep your distance

Change is hard and we are all adapting to the situation we find ourselves in. At Juniper Wealth we are adapting to working remotely as a team and working remotely with clients. For some the change will be easier for than for others and our thoughts are with the friends and family we have whose livelihoods, businesses and jobs have been turned upside down by recent events.

Basic evolutionary theory teaches us that adaptation is the biological mechanism by which humans adjust to changes in their environments. We find ourselves living in a period of great change, and it is those businesses that adapt to change best that will come out on top, after the virus subsides.

In the UK, we are being urged to stay indoors and socially distance ourselves to prevent the spread of the virus further. As humans, we are experiencing significant structural reform as we adapt to our new working lifestyles and plan around the latest advice issued by the Government. Negligible commute times and a ban on outdoor social activity has created a great deal of free time for people to utilise. Governments across the world are assessing measures to restrict the economic disruption that the virus is causing.

It seems the UK’s approach has been more staggered than the rest of Europe’s with Boris briefing the nation daily by issuing more restrictions and providing further guidance. Whereas in Germany, gatherings of two or more people have been banned and illustrates a direct approach than it appears the UK are operating with. The UK are more focused with reducing their economic hit from the virus than reducing the spread of the virus and it is expected that more drastic restrictions in the UK will follow. The decision to close schools in England was made after Wales and Scotland. However, the ban for pubs, gyms and restaurants shows that Boris intends to issue more rigorous policies.

Rishi Sunak has offered £350bn in the form of loans and grants to save British businesses from insolvency and workers from redundancy. This economic response appears to be one of the most significant displayed from any major country. Germany has made available €500bn in the form of loans available to all businesses and has encouraged firms to defer their tax payments. There doesn’t appear to be a generic response, but fiscal stimulus appears to be the most popular decision taken. Hong Kong has selected a more direct stimulus and has pledged to give HK$10,000 to each citizen. However, with lock-down measures likely to be in place, this doesn’t appear to be an effective response.

The last pandemic was the swine-flu pandemic in 2009-10 which infected almost 1.4bn people globally but the death toll ranged from 151,700 to 575,500. Swine flu was more prevalent in younger people which we now know to be the opposite of COVID-19. The effect of swine flu was masked by the financial crisis of 2008.  However, COVID-19 is the first pandemic to exist in the social media era where information and opinion is more readily available and is one of the major factors attributing to the high volatility of the global markets.

What we all need to appreciate is that we are living in a period of unprecedented change and we all need to be adaptive, bold and co-operative to ensure we continue to deliver to our clients.

During times of heightened market volatility, many investors feel a strong urge to de-risk and sell out of their equity positions. However, history has rewarded patient investors who stayed invested over a longer time horizon. There has never been a market drop without a subsequent rally and with equities at a major discount, this offers a suitable opportunity to top up your equity positions.