Investment market update: February 2021

May 08, 2021

A year after lockdowns around the world began, Covid-19 continues to affect economies and investment markets. While the volatility experienced almost 12 months ago may have calmed, uncertainty remains and it’s important for investors to focus on their long-term plan.

In February, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), called on leaders of the G20 to deliver strong policies to support the global economic recovery. She set out three points to achieve this:

  1. Speed up vaccinations
  2. Provide more support to households and businesses
  3. Provide additional support for the poorest countries.

With millions now vaccinated, there is light at the end of the tunnel. However, Covid-19 continues to present risks and there are concerns of new waves emerging when restrictions ease.

UK

Official figures from the Office for National Statistics show UK GDP suffered its worst annual slip on record, falling 9.9% in 2020. However, we avoided a double-dip recession following growth of 1% in the final quarter. After introducing a third national lockdown at the end of 2020, it’s uncertain if the growth will continue into 2021.

Highlighting the challenging economic circumstances faced by the UK is a recent Bank of England announcement. The central bank opted to keep interest rates where they are, at a historic low of 0.1%, but said banks should prepare. Negative rates aren’t guaranteed but consideration suggests the bank is preparing further hardship. It’s a move that would have a significant impact on savers.

Another key indicator of the economy is unemployment figures. Official statistics show the UK jobless rate was 5.1% in the final three months of 2020. This compares to 3.8% at the end of 2019 and represents a five-year high. Crucially, the furlough scheme is providing some cushioning. Provisional HMRC estimates show there were 4.7 million jobs furloughed at the end of January.

Despite supermarkets being among the “winners” of lockdown, Asda has announced a major shake-up to operations that will put thousands of back-office jobs at risk in a further blow to the unemployment figures.

There are some positive signs for the retail sector, however. According to figures from data company Springboard, footfall is rising. In the last week of February, the company reported a 10.5% increase in high street footfall, as well as a 4.5% and 1.2% increase in shopping centres and retails parks, respectively. The reopening of non-essential shops is still several weeks away but the increase suggests pent-up demand that could deliver a much-needed boost to the sector.

The pandemic has overshadowed Brexit, but two months after the UK left the EU, companies are reporting trade challenges. A report from the Chartered Institute of Procurement and Supply found two in three supply chain managers are experiencing delays of at least two or three days. This compares to 38% that said the same in January. It could signal that businesses will face further obstacles as markets and businesses reopen.

Europe

Statistics from Eurostat suggest the eurozone could be on track for a double-dip recession. In the final quarter of 2020, the economy shrank by 0.7%, adding to the 6.8% decrease for the whole of 2020. The dip follows many governments introducing new Covid-19 restrictions towards the end of the year.

Despite this, confidence is rising in some parts of the economic area. German business confidence beat expectations, rising to 92.4 in an index run by the Ifo Institute, a few points higher than the 90.5 forecast. The index also showed renewed confidence in the constriction, retail, and other service sectors. As the largest economy in the eurozone, this is a welcomed sign.

US

With Joe Biden’s inauguration taking place on 20 January 2021, February was his first full month in office, and it was a month of mixed signals.

The Chair of the Federal Reserve warned the US economic recovery was uneven and “far from complete”. Echoing this, the University of Michigan’s monthly consumer sentiment hit a six-month low. The results found future economic prospects are a concern for the general public. Despite this, there are positive signs. Retail sales, for example, jumped 5.3%, far stronger than the 1.1% expected, according to the Commerce Department.

There are also signs that the travel industry is picking up, although Boeing has faced another blow. The company has already endured the worst period in its history after its failings were found to be the cause of two fatal crashes, leading to its bestselling plane being grounded, which was then followed by the pandemic. Now, further questions are being asked about the safety of some of its 777 engines, leading to additional bans and stock prices falling.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

What our clients say

The people we help are at the heart of what we do. Here are some of their testimonials.

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015

I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

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