On 1st March, there were just 36 Covid-19 cases recorded in the UK and no one had died. Just one month later, on 1st April, there were 25,150 recorded cases, 1,789 lives lost, and we understand many, many more people are ill at home and are unrecorded cases.  Such has been the speed and the scale of the outbreak.

One month on, and with a slightly clearer understanding of the scale of the pandemic, we are writing to you with some thoughts.

We are sure that, in the years to come, historians will view this pandemic in 2020 as a pivotal moment in history and, probably, will in time compare these events to:

  • The French Revolution. On the 14th July 1798, a group of revolutionaries stormed a prison, the Bastille, looking to secure gunpowder and weaponry.  This put the wheels in motion, in what led to the French Revolution.  This was a watershed event in history.  It saw the French abolish feudalism, form a republic and a constitution based on the principles of equality and freedom.  The Revolution had a far-reaching impact and transformed the world; it lessened the power and importance of religion, gave rise to Liberalism and sparked the idea of revolution across the world
  • The outbreak of WW1. On the 28th June 1914 the Archduke Franz Ferdinand of Austria was assassinated, and nobody could have predicted this act would result in the “war to end all wars.”  The First World War changed the shape of warfare, medicine and science, healthcare and probably helped the shift in the balance of geopolitical power from the old world, to the United States of America.
  • The Great Depression. After a decade of ever-increasing stock market prices, 1929 saw the bursting of the share price bubble. This led to a banking panic, an economic contraction, reduced demand, reduced international trade and the imposition of tariffs as countries tried to protect themselves. Many commentators go as far as to say that this was one of the catalysts behind WW2, the cold war, communism and the free market economy that we in the west have enjoyed uninterrupted for over 70 years.

On 11th January 2020, China announced the first death of a new disease, and within months the coronavirus had spread to every country in the world.  Posing huge problems to the way society functions, where lockdowns and isolation have become the new norm, and the measures in place now could be in force in some form, tighter or more relaxed for many months. 

Is Covid-19 one of these historic moments? Will the drivers underpinning our economics, the supply and demand for goods and services, change permanently?

The world has been forced to change in ways we could never have envisaged, and within a matter of weeks, many institutions and structures that the world has built over the last 70 years have come to a grinding halt.

With much of the world effectively shut down, possibly for the best part of 2020, a recession is potentially inevitable. We must brace ourselves for economic falls which will dwarf the lost output from the 2008 Global Financial Crash and could even match the Great Depression itself. 

Many businesses that existed before the crisis will fail. For example;

  • Cruise ships and airlines will be heavily impacted.  It is likely that these industries will need bailouts, akin to the banks during the Global Financial Crisis, if they are to survive.
  • Retailing patterns will change as people have now experienced online shopping.
  • Some office space may become redundant, and demand for space fall, as the world realizes that with modern technology, many people can work from home.

Economic growth will take some time to recover. Structural changes, and even short-term changes to the supply and demand models, cause real disruption.

  • The focus for this summer is directed purely at the health of our people, nothing else matters.
  • There are shortages of essential goods, medical equipment and services that must be supplied.
  • And then, as the storm passes, and the world becomes once again a calmer and safer place, the rebuilding must take place before we can return to the standards of living that we have all enjoyed.

Unprecedented government aid packages for businesses and workers, have had to be introduced and quickly. These are essential to mitigate the economic and financial impact of the crisis.

  • People need to be safe and kept fed and healthy.
  • Businesses need to be protected if they are to be able to re-establish themselves quickly once Covid-19 is beaten.
  • And state intervention has become inevitable, free markets by themselves cannot sort this out.

However, nothing is for free. And Covid-19 is not an interruption whereby normal service will be resumed quickly. The virus may well burn itself out or be conquered within a year, but the impact it leaves will take many years to recover from.

The world will be poorer for longer, the government interventions will have to be paid back at some point, and the decisions today laden more debt onto you, your children and your grandchildren. 

But we, humans, are nothing if we are not resilient and resourceful. We have no doubt, the future is good.

In the long term, when the memories of these events fade the falls in markets and assets around the world will seem part of the general noise.  But in the immediate term, we are not expecting a short sharp recovery; time will be needed to let the dust settle, and see what businesses emerge, stronger, from this crisis.

I am certain that you, our clients, are impacted and that you are either required to stay at home to protect yourselves and others, or you are out on the front line fighting for us. Either way, your lives have changed, and so might your personal and financial objectives.

With modern technology and a little bit of foresight, all of us at Gould financial planning are able to work remotely from home and continue to provide a near seamless service for you now, during the crisis and, we hope, afterwards when the storm has passed.

Our investment committee are watching developments carefully, and over the course of the coming months, we may well feel a need to amend asset allocations, make some tactical asset allocation calls and, in the light of Covid-19 make some changes to the fund selections.  We feel it is still too early for us to make long term calls of this nature.

We continue to believe that drip feeding into the market is more relevant than ever given the current asset price volatility and, for those clients looking to access money, there will be a need to consider carefully both ‘when’ and ‘what’ to sell.

We anticipate still sending out the half yearly economic commentary in July, but, of course, if there are any major developments in the meantime, we will be contacting you.

Please call us, email us, speak to us. Let us know how you feel and whether this has had an impact on your personal and financial objectives. If your objectives remain the same as they were previously, we may just need to provide some re-assurance to you that we are monitoring the situation for you. If your objectives have changed, we may need to re-assess your position. We need to know if your thoughts, goals and aspirations have changed so that we can ensure that we help you meet these changes.

Stay well.  Stay safe. Stay in touch

With kind regards from all of us at Gould Financial Planning

Article published: 06/04/2020

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