IN THE
KNOW
AN EXP ERT V IE W ON
IN V EST MEN TS A ND
MARKET STAB IL ITY
By Active Chartered Financial Planners’ director and
independent financial adviser Karl Nendick
S
ince the UK voted to leave the
EU in June 2016 the main topic
at client review meetings has
been Brexit. However, this has
more recently been overshadowed by
issues around Covid-19.
The B-Word
On January 31 the UK finally left
the European Union. We thought
that Brexit and the US presidential
elections would be the main influencer
of markets throughout 2020. How
wrong we were.
Covid-19
Since Covid-19 originated in China
at the end of 2019, it has taken over
as the main influencer, not only on
markets but on the way of life for
the entire world. The spread of this
pandemic has been staggering, with
52 | Tees Business
the advice of governments changing
daily as anxiety levels rose due to
uncertainty.
Like the spread of the virus, the rate
of policy change by prime minister
Boris Johnson and his team has been
remarkable, but necessary. First, the
advice was to wash our hands more
regularly. The chancellor Rishi Sunak
then pledged £30bn to fight the virus
in his first budget. Other than that, it
was business as normal.
We’ve since seen the closures
of bars, restaurants, schools and
universities as well as being told to
stay at home. In addition, the military
has 20,000 personnel on standby and
the government has increased fiscal
support to £350bn. It’s possible that
lockdowns may be next, but this could
be old news by the time this article is
printed.
Never before have we seen
governments around the world order
their country’s economic activity to
be curtailed, which is undoubtedly
leading the globe into a recession.
This has led to corporate profit
expectations in various risk assets
to be slashed as the uncertainty hits
home.
We’ve seen huge swings in the
equity markets around the world with
extreme volatility at times. As with the
financial crisis in 2008/9, even safe
havens such as Government Bonds
have suffered as investors sold off
assets to raise cash.
There are key differences
to 2008/9, though. Back then,
securitisation led to the whole financial
system crashing down. Investors
bought debt to provide security in
portfolios but this was adding to the