Friday Update: How to invest during Covid
The global impact of the pandemic
Some of the world's largest economies are beginning to report second quarter GDP data that reveals the scarring caused by lockdowns between April and June. The US economy shrank 9.5% during Q2 compared with Q1. That's an annualised rate of -32.9%, slightly smaller than the consensus forecast for a -34.1% contraction. Meanwhile, the German economy shrank 10.1%.
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Flora Harley this morning looks at some of the key upside and downside economic signals. Flora notes how real-time indicators are beginning to show the impact of a rise in cases. Economists now expect the global economy to shrink 4% this year, before growing 5.3% next year, according to a Reuters poll.
Vaccine developments
As pockets of a resurgent virus emerge, global attention turns towards developments in the race for a vaccine. Gilead Sciences expects to make more than 2 million doses of its Covid-19 treatment remdesivir by the end of the year. The treatment received emergency-use authorisation in May after a large trial found it sped recovery by about four days in hospitalised patients. Meanwhile AstraZeneca and the University of Oxford have given almost 10,000 people in the UK their experimental vaccine. AstraZeneca has committed to starting delivery of 30 million vaccine doses to the UK by September and 100 million by the end of the year. It also has supply agreements with the US and EU.
Volatility in markets
Uncertainty over the pandemic is contributing to volatility in markets. Oil, which acts as a proxy for investors' views on future economic output, hit a three week low earlier this week, although it has started to tick back up this morning. The dollar is on course for its worst month in a decade as the epicentre of the virus shifts towards the midwest. As noted by Flora this morning, investors are increasingly seeking safe-haven assets, of which real estate is a beneficiary. Gold has come within touching distance of $2,000 – its highest level ever recorded - and is on course for its best month since 1979.
New lockdowns
Health Secretary Matt Hancock said late last night that the lockdown in parts of Northern England will be tightened, owing to an increasing rate of transmission. Areas include Greater Manchester, parts of West Yorkshire and East Lancashire. We're seeing similar efforts across the globe, from France to Melbourne and Tokyo.
Investing during a pandemic
In a new Intelligence Talks podcast, Will Matthews and guest Simon Marx, Head of UK Research & Strategy at LaSalle Investment Management, discuss investment strategy in the midst of Covid. Simon notes that shifts are at play in the real estate sector but knee jerk assumptions such as significant numbers of urbanites moving to living in the countryside are unlikely. He touches on what he thinks is the big question – how will remote working evolve and what will the impact be on offices? Finally, he goes into how he thinks real estate research will evolve on both a macro and micro level. Listen on Apple, Acast and Spotify.
In other news...
Knight Frank's planning team have an update on changes to the Use Classes Order; Hong Kong private home prices edged up 0.1% in June; the UK government adds Luxembourg arrivals to 14-day quarantine list; Lloyds expects UK house prices to fall 6% this year, and finally mortgage lending stages a comeback.