From a macro-economic perspective the news this week was not encouraging as surveys of economic activity across the developed world collapsed to levels not seen before, and oil prices reached new lows for this cycle. Interestingly, investors took these developments broadly in their stride as the US federal government introduced additional support for small businesses and the Eurozone discussed the provision of further support for countries within the region which have been impacted most severely by the COVID-19 infection.
Perhaps a greater impact on investor confidence however were the announcements by the authorities of a number of countries that they were beginning to roll back their economic lockdowns following lower reported COVID-19 infections.
Within the UK individual companies began to make plans to accommodate social distancing within their operations, such that they could begin to open up for business again despite the hard lockdown. Some car production lines, house building sites and DIY stores are planning to start up again over the next few weeks, albeit cautiously.
Markets have rallied on the announcements of massive stimulus, both fiscal and monetary, however the credit cycle is now in sharp contraction and with businesses and consumers likely to hoard cash until it is proved that there will not be a second COVID-19 infection wave, the recovery when it happens, is likely to be disappointing following a first flush of enthusiasm.
It remains a close call as to whether the massive stimulus measures which have been enacted will win out in the near term, versus the forthcoming period of very poor company updates. As a result we remain cautious at this time.