For all but the most reclusive Netflix obsessives, 2020 will have proved a year of massive inconvenience. The announcement of a new Tier 5 of nationwide restrictions this week suggests that, sadly, we can expect further disruption for some time. To pinch JD Wetherspoon boss Tim Martin’s recent comments, we are now in lockdown in all but name.
The economic consequences of this will come as no surprise to anyone – having bounced back sharply, the country is now firmly on the path towards a double-dip recession, and predicted to be one of the slowest to recover, hopefully this year. Aware of the extent of the damage to come, the chancellor is offering further support packages – yet a £9,000 grant for hospitality businesses pales into insignificance against the industry’s lost Christmas takings, and a dry January that extends to several months. And the lingering question of who will be picking up the enormous Covid bailout tab is still far from answered – it is a burden that will potentially fall hard on future generations, many of whom won’t have properly completed their education, and who face one of the most hostile job markets in living memory.
It has certainly not been the best way to start a new year, and there is a palpable feeling that the British stiff upper lip is starting to wobble in the face of the new Covid variant and the restrictions it has ushered in. Along with the apparently more transmissible virus mutation, an increase in testing means a lot more positive tests, there are rising hospitalisations, and a feeling that the virus is closer than ever. And while suspicions over the speed of vaccine development have now given way to resignation that taking it may be the only way back to normal life, the latest concern is that there may not be enough to go around. Life on Covid Island is a struggle, as we document here.
Life on the markets has, surprisingly, been much better. True, there was the small matter of the Covid crash in March, and many companies have seen their share prices battered or dividends cratered. But there have also been capacious pockets of continued growth around the world – including new record highs in the US and China – and some extraordinary individual price performances, as you can see in our newly configured market data pages. Meanwhile, many companies that cut their dividends have reinstated them, and even unloved UK indices have bounced – and harder still this week on signs of life in the oil market, as Alex Hamer discusses here.
We are at a point where it seems reversals can come thick and fast. As I expected would happen, the rotation to value did not last long, with growth once again outperforming in the last month of the year. And events in the US state of Georgia this week appear to have prompted yet another form – democrat victories in senate run-off elections there mean President Joe Biden now has an opportunity to push through a far more expansive policy programme than had previous been expected with the senate under Republican control. Green energy and infrastructure is likely to be at the heart of President Biden’s plans, paid for by masses of fiscal stimulus – always popular with markets. On the flipside, longstanding concerns about regulation of the technology industry have been elevated – so once again flip-flopping investors are eyeing value.
Yet, as Mary McDougall discusses in this week’s cover feature, the growth vs value debate has turned a nuanced discussion into a binary issue – which investing rarely is. And after a year of living with Covid-19, we should be used to such vicissitudes by now anyway.
