This week Jeff Lewis, director at RobMac, suggests that despite the fight against controlling the pandemic is far from being won, equities are predicted to move forward into further positive territory .
Last week saw the publication of the Purchasing Managers’ Indices (PMIs) in Europe. They fell back heavily suggesting that, after the initial surge in pent up demand as lockdowns were eased in late spring, the pace of recovery has slowed.
And those second waves seem to be closely related to pent up demand from Europe’s citizens for a holiday. All that increased social interaction means that France is now suffering nearly 5,000 cases a day. The same effect is appearing in some other European countries as well.
The UK is generally seen to have performed badly in the fight against the virus with one of the highest death rates in the developed world and has also had the biggest fall in GDP of any major economy. But now, daily cases are low and stable, and an early focus on outbreak clusters, such as the ones in Leicester & Aberdeen, has suppressed the virus even as national lockdown easing leads to a gradual increase.
As well as better news on the virus, the UK PMIs jumped last week to 60 (above 50 signals expansion)and indicates that the UK is one of the strongest in the world, supporting the idea that the UK is recovering rapidly from the deep recession.
The last fiscal package with deals on restaurant meals and a cut in VAT are giving a huge boost to the hard-hit restaurant sector. Of course, the winding down of the furlough scheme poses a massive challenge but the UK recovery is undoubtedly getting off to a strong start.
What is positive is that the Oxford vaccine trials show that it is effective in giving protection from the virus and the latest news is that the UK will have 30 million doses available next month, which is two months ahead of the previous target. This indicates that the vaccine can be mass produced hence the reason the US is hoping to take delivery of an even bigger order in October.
This of course is all predicated on the success of the trials, and approval from the medical authorities. Remember that a vaccine is given to entire populations of healthy people, so the bar for regulatory approval is high. However, if the Oxford one is not as successful as hoped there are another 12 vaccines in various stages of assessment which makes the situation a little more optimistic.
On the basis that the Oxford one proves its worth then several Fund Managers predict that returns will be positive for Equities as we move back to something nearer normality.
And we would all welcome that.
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