A Fairer Society?
A fairer society is the great hope of many as the world emerges from this pandemic. That does seem to be the way responses to the Covid-19 virus have steered fiscal policy.
Frustration frequently results in protests – the gilets jaunes for example, although French protesting is a cultural thing going back to the revolution. In the US, the death of George Floyd and the resultant Black Lives Matter protests have lit the touch paper which has the potential to change society in profoundly positive ways both in the US and worldwide.
As we said in a recent mid-monthly, smaller companies (some not so small in the US) who have the ability to multiply their value in the tech space are the companies to focus on. Tech is yet another label that is in danger of being misrepresented. In any industry, whether it be farming, retail or industrial production, companies who don’t embrace technology will struggle and won’t be one of the growth companies we seek.
The quantitative easing (QE) programme spawned by the financial crisis of 2008/9 was needed to save the banking system. An unintended consequence was that it benefited those with assets but made little direct difference to those without. This pandemic isn’t causing a banking solvency problem (although it caused a liquidity problem for a couple of weeks in March), but the scale of fiscal and monetary assistance has done a lot to lessen the sudden hammer blow the global economy received. The size of monetary support, especially in the US, should prevent a recurrence of a liquidity problem and remove the possibility of a banking crisis.
The UK’s fiscal response to the pandemic was impressive and comprehensive. Support for those in danger of becoming unemployed has been unprecedented, but lockdowns can only be temporary because of the huge economic cost. As furloughs end or become diluted, unemployment will inevitably rise. Continuing to support the less well-off, unemployed electorate not benefiting directly from the bounce in asset prices will be key to avoiding public protests and disaffection with the establishment.
Managing the lockdown’s easing is a difficult but essential task. The real challenge may come in the autumn when seasonal flu reappears – make sure to get your flu jab. What we are investing in may not be immune to any second wave financial market reaction but shouldn’t be derailed by it either. The growth rates prevalent in cloud computing, cyber-security, artificial intelligence and e-commerce are attractive in any scenario.
Working from home continues to be an effective and productive exercise. We are carefully planning our return to the office and flexible working will be a feature of the team’s working practices going forward. Our ability to manage your investments is unimpaired and we remain available to speak by phone or video should you wish.