18th May 2020
US-China Cold war: Threat or blessing?
Halfway through May and stock markets have continued to deviate markedly from the classic bear market
pattern described in “The anatomy of a bear market” in The Cambridge Weekly of 30 March (see graph
on next page). What looked very much like a bear market rally in the last week of March is increasingly
looking like a V-shaped market recovery, and thereby quite different from what we have come to expect
from the restarting of the economy. As more and more countries are anxiously lifting restrictions of
movement for their citizens, it is becoming clear everywhere that it was far more straightforward to send
workers home than bringing them back to work is proving.
The curious relationship between bricks and mortar and land
Land Securities – the second biggest property investment trust in the country – released a grim annual report this week that disappointed capital markets. In the 12 months leading up to March, the property group wrote down its £10.3 billion property portfolio by 11.6% or £1.2 billion, after a slump in retail property valuations.
Of course, economic hibernation worsens the situation, but fewer than half of Land Securities’ asset revaluations were ascribed to this. As investors in UK open-ended property funds know only too well, the Brexit referendum accelerated commercial property’s issues. Figuratively and literally, the issues are structural.
Will it be ‘back to school’ after the pandemic?
Virtually all sectors, businesses and individuals are now, one way or another, having to adjust to the current crisis. For most companies, this means either coming up with new ways to generate revenue or getting enough cash together to hold out until our economic ice age starts to thaw. Broad-brush government measures – like the furlough scheme or emergency loans – will help (if people can access them) but the problems facing each sector are diverse and particular; there is only so much a one-size-fits-all policy can do. In economic terms, it is notable how the coronavirus pandemic is accelerating themes already in play – the massive uptake in web-based and delivery services being a prime example. Different sectors must learn to adapt – not just for now but for the post-pandemic world too – and having an idea of how they will do so will be crucial for long-term investment.