Monthly Market Pulse: September

2020 has been an unprecedented year. The short-term economic contraction we have seen has been the worst since the Great Depression and far deeper than the global financial crisis. We have also seen an overwhelming policy response from Governments around the world to cushion the pandemic’s impact. We have seen Governments trying to outdo each other and show who has the biggest package. Not only have we seen unprecedented Government support in speed and in size, but we have also seen a different type of Government support compared to previous crisis. Policymakers are relying less on financial sector transmission to stimulate activity and more on direct support to the real economy. So, what now?

Chart of the month: UK retail sales recovered from the sharp falls experienced earlier

Source: Office for National Statistics – Monthly Business Survey and Retail Sales Inquiry, Blend Network

Politics

  • In a televised address to the nation, his third since the start of the pandemic, the UK Prime Minister Boris Johnson set out new Covid-19 restrictions, including earlier closing times for pubs, bars and restaurants staring on 24 September.
  • AstraZeneca and the University of Oxford resumed their clinical trial of a vaccine following a short postponement when a volunteer fell ill.
  • UK chancellor Rishi Sunak abandoned his planned Budget for a short-term round of targeted measures and more targeted support for sectors like hospitality and travel.

Business & Economics

  • The US Federal Reserve announced it will keep interest rates pinned near zero.
  • Worries that Britain is at risk of deflation grew after the annual inflation rate fell to 0.2% in August, own from 1% in July. The Government’s Eat out To Help Out scheme may have contributed up to 0.5% points of the drop.
  • In its quarterly economic forecast, the OECD revised up growth forecasts for most countries it tracks but said public spending was needed to support economic recovery.  

Real Estate

  • Following a short-lived blip in June, annual UK house price growth picked up to 3.7% in August, the strongest growth since February 2017 (4.5%).
  • Looking at monthly price activity, prices were up by 2% in August compared to July following a 1.8% rise in July. This is the highest monthly rise since February 2004 (2.7%). As a result, UK house prices are up by 2.2% year-to-date during the first 8 months of the year compared to the same period last year.

Equity Markets

  • Investors are starting to fret over the recovery ahead, with the Fed warning that the US economic recovery would suffer if there is no further stimulus and the UK set for a longer winter of discontent.
  • Investors have been nervous for a while that equity markets may see a correction following their rise after the first wave of the pandemic. And markets saw a red Monday last week when the FTSE100 was down by 3.4%, the EuroStoxx500 composite lost 3.7% and Germany’s DAX lost 4.4%.  The FTSE100 is down by 21% year-to-date.

FX & Commodities

  • August was a tricky month for gold investors and the gold rally seems to have paused modestly in the short term. However, we believe the downside should be limited to levels of around $1,850 and that this is a pause, not a turnaround. The reasons for gold’s longer-term outperformance the are as valid now as they were one month ago.
  • Geopolitical tensions between the US and China increased again after President Donald Trump threatened to “do something” about the World Trade Organisation after it deemed that tariffs imposed by America on China in 2018 broke its rules.

Both our pipeline of loans and the appetite from our lenders remains very strong. Last week, we funded a £700,000 9% return p.a. loan in just 57 minutes. Keep an eye for new loans coming at www.blendnetwork.com

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