{"id":2073,"date":"2020-08-19T11:25:10","date_gmt":"2020-08-19T11:25:10","guid":{"rendered":"http:\/\/www.wealthatwork.co.uk\/jpm\/?p=2073"},"modified":"2020-11-18T09:32:25","modified_gmt":"2020-11-18T09:32:25","slug":"market-update-19th-august-2020","status":"publish","type":"post","link":"https:\/\/www2.wealthatwork.co.uk\/jpm\/2020\/08\/19\/market-update-19th-august-2020\/","title":{"rendered":"Market Update \u2013 19th 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\/tDYDjO7u9VM?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 US economic surprises continued coming yesterday (Tuesday 18 August 2020) with readings for both housing starts and building permits coming in significantly higher than economist expectations.<\/p>\n<p>Housing starts jumped 22.6% to nearly 1.5m on an annualised basis from 1.2m last month, while permits to build a new house increased 18.8% to nearly 1.5m from 1.26m last month.<\/p>\n<p>While some market commentators will brush these readings aside due to the supportive demand backdrop of low interest rates, we believe they are fundamentally more important.<\/p>\n<p>It suggests to us that Americans are confident:\u00a0 confident about the security of their jobs (suggesting that the worst of the US coronavirus layoffs is probably now behind us); and confident enough to spend rather than save.<\/p>\n<p>The US is a consumer-driven economy (with the consumer accounting for two-thirds of the US economy) and so consumer spending will obviously help the economy to quickly and strongly bounce back \u2013 especially as building and moving house sets consumer spending in motion, which will last for several months as people spend on new decorations and furnishings.<\/p>\n<p>Adding to our recovery optimism was Home Depot\u2019s results statement.\u00a0 Home Depot is the US equivalent of the UK\u2019s B&amp;Q \u2013 and they yesterday said that comparable store sales jumped 23.4%.<\/p>\n<p>Interestingly, the UK\u2019s biggest house builder, Persimmon, also said yesterday that house reservations had jumped 49% since the start of July compared with the same period last year and as a result, the company had returned to its pre-coronavirus building pace. \u00a0As with the US, the UK housing market is very important as it has a profound effect on the wider economy as so much of our personal wealth is invested in our homes.\u00a0 As a consequence, a strong housing market can improve our confidence and encourage consumer spending \u2013 which contributes to economic output and creates jobs, etc.<\/p>\n<p>However, it wasn\u2019t all sunshine and rainbows, as Marks &amp; Spencer announced plans to cut 7,000 jobs, which equates to around 10% of their total workforce.<\/p>\n<p>As we have previously warned in our commentaries, while the UK government\u2019s job retention (furlough) scheme has been very successful in helping to support the UK economy, it has effectively kept the unemployment numbers artificially down \u2013 and given just over 9.5m workers, or nearly a third of the UK workforce, have been furloughed, as the scheme starts to wind down (and ends completely on 31 October 2020), unfortunately there will be many more announcements similar to that of M&amp;S\u2019s.<\/p>\n<p>Consequently, we will only start to see the full extent of the damage caused by coronavirus to the UK employment market in the coming months \u2013 unless of course Rishi Sunak, the Chancellor of the Exchequer, reverses course and extends the furlough scheme, as Germany is widely expected to do.<\/p>\n<p>This morning in the UK, we have had CPI inflation data.\u00a0 While both the headline and core readings rose strongly (the headline rate climbed to 1% from 0.6%, while the core rate, which excludes volatile items such as food and energy, rose to 1.8% from 1.4%), we don\u2019t believe this is the start of an inflationary upswing as coronavirus lockdowns have distorted prices.\u00a0 For example, clothing and footwear prices are 6.7% higher than they were a year ago \u2013 but this reading is being distorted by the delaying of the usual summer sales promotions.\u00a0 Instead, as we have previously highlighted, we expect UK inflation will slow (and could be negative \u2013 i.e. deflation \u2013 next month) due to the recent VAT cut for the hospitality sector from 20% to 5%, coupled with the \u2018eat-out to help-out\u2019 promotion which has obviously reduced the cost of eating out.<\/p>\n<p>Later today (7pm UK), we will get to see the minutes of the Fed\u2019s last monetary policy meeting (held on 28-29 July 2020).\u00a0 Although policymakers left US interest rates unchanged at 0.25%, they did state they would use all its available tools to support the US recovery, while Jay Powell, the Fed Chair has since said the economic downturn is the most severe \u201cin our lifetime\u201d.\u00a0 Consequently, we will be looking at the minutes for clues on what support the central bank is considering and for hints to see if policymakers will adjust their current goal and allow US inflation to run above their current 2% target.<\/p>\n<p><strong>Investment Management Team<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n  <\/div> ","protected":false},"excerpt":{"rendered":"<p>The US economic surprises continued coming yesterday (Tuesday 18 August 2020) with readings for both housing starts and building permits coming in significantly higher than economist [&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\/2073"}],"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=2073"}],"version-history":[{"count":2,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2073\/revisions"}],"predecessor-version":[{"id":2131,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2073\/revisions\/2131"}],"wp:attachment":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/media?parent=2073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/categories?post=2073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/tags?post=2073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}