{"id":2059,"date":"2020-08-06T11:20:23","date_gmt":"2020-08-06T11:20:23","guid":{"rendered":"http:\/\/www.wealthatwork.co.uk\/jpm\/?p=2059"},"modified":"2020-11-18T09:35:07","modified_gmt":"2020-11-18T09:35:07","slug":"market-update-6th-august-2020","status":"publish","type":"post","link":"https:\/\/www2.wealthatwork.co.uk\/jpm\/2020\/08\/06\/market-update-6th-august-2020\/","title":{"rendered":"Market Update \u2013 6th August 2020"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_raw_code wpb_content_element wpb_raw_html\">\n<div class=\"wpb_wrapper\"><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/yWtkRbi_FOM?rel=0&amp;wmode=transparent\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_text_column wpb_content_element \">\n<div class=\"wpb_wrapper\">\n<p>The BoE\u2019s monetary policy decision, meeting minutes and forecasts were all released at 7am this morning.<\/p>\n<p>As expected in a unanimous decision (9-0) the BoE left both the UK\u2019s interest rate and its QE program unchanged at 0.1% and \u00a3745bn respectively.<\/p>\n<p>However, for us the meeting minutes and revised economic forecasts (covering growth and inflation) were of greater importance as this provides clues into the thinking of the nine policymakers \u2013 especially in the context of using negative interest rates.<\/p>\n<p>As we have previously highlighted in our commentaries, while the low point for the UK economy is now thankfully behind us, the UK economy still needs to be supported, especially given the government has started to taper its job retention (furlough) scheme.\u00a0 This tapering is likely to result in a significant rise in unemployment in the coming months \u2013 and unemployment could unfortunately, easily hit 3m (a level last seen in the 1980s), given coronavirus cases are on the rise again in some parts of the UK, resulting in localised lockdowns.<\/p>\n<p>Although the BoE admitted that the UK economy contracted less than they expected during Q2 (helped no doubt by the government\u2019s furlough scheme which has supported employment and consumer spending), they also said they don\u2019t expect UK GDP to fully recover to pre-coronavirus levels until the end of 2021:\u00a0 they are forecasting GDP to contract 9.5% in 2020 and expand 9% in 2021 and then a further 3.5% in 2022.\u00a0 This would suggest to us they expect the recovery to resemble a \u2018Nike Swoosh\u2019 shaped recovery (i.e. still a strong recovery, just slightly slower than a \u2018V-shaped\u2019 recovery).<\/p>\n<p>Annoyingly, the BoE fell short of providing definitive clues on the outlook for monetary policy, simply saying they \u201cwill keep under review the range of actions that could be taken\u201d to meet its remit \u2013 and disappointingly talked about when interest rates might rise (which it now expects to be within the next 2 years, as it expects inflation to start increasing towards its 2% target).<\/p>\n<p>Consequently, the pound has strengthened this morning to $1.318 \u2013 and given around two-thirds of the FTSE-100\u2019s total revenue is derived from abroad, a strong pound is bad for the FTSE-100 as it lowers returns for exporters and the value of overseas earnings, hence the FTSE-100 has opened this morning down just over 70 points, or 1.20%.<\/p>\n<p>However, our commentaries have consistently stated that there is an obvious need for more monetary stimulus and as a consequence, we strongly believe that the BoE is wrong \u2013 and in fact will need to act before the end of the year, if not before the end of the summer, with an interest rate cut and\/or a significant increase in QE, especially as last month\u2019s Summer Statement from the Chancellor of the Exchequer, Rishi Sunak, reduced VAT on hospitality from 20% to 5%, which considerably increases the UK\u2019s deflationary pressures (even before this VAT cut, inflation was well below the BoE\u2019s target of 2%).<\/p>\n<p>The weekly US jobless claims data is due this afternoon and we will discuss this in tomorrow\u2019s commentary as the recent resurgence in coronavirus cases and the subsequent halting of the lockdown easing in a number of US states is likely to have had a detrimental impact on the employment market.\u00a0 However, any bad news should focus minds in Washington and could help to ensure a new stimulus deal is reached sooner rather than later.<\/p>\n<p><strong>Investment Management<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n  <\/div> ","protected":false},"excerpt":{"rendered":"<p>The BoE\u2019s monetary policy decision, meeting minutes and forecasts were all released at 7am this morning. As expected in a unanimous decision (9-0) the BoE left [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"_links":{"self":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2059"}],"collection":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/comments?post=2059"}],"version-history":[{"count":2,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2059\/revisions"}],"predecessor-version":[{"id":2138,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2059\/revisions\/2138"}],"wp:attachment":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/media?parent=2059"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/categories?post=2059"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/tags?post=2059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}