Sometimes inactions speak louder than words
I had to listen to the Budget whilst driving back from Birmingham yesterday. I had anticipated being back in the office when the speech was taking place, but as I had booked flights with Flybe, and at present no other airline has taken over the route, driving was the most sensible way to make the trip.
It is inconveniences like these that we will have to put up with in the coming weeks as undoubtedly a number of ways that we have been used to doing things will have to temporarily change. (Note the bold type!) Events are being postponed or cancelled and there may be restrictions on gatherings. But we are a stoic race and we will get through it and at some point things will get back to normal.
Why am I so confident? The following chart shows how the delay/containment policies adopted in China and Korea, and now Iran, can quickly produce significant results. There is nothing to indicate that a similar peak to trough will not occur in the UK, US and the rest of Europe as a result of measures being initiated.
Now I am not suggesting there will not be an economic impact, there will be. However, in China there are signs that the impact may be short-lived as according to the China Economic Recovery Index, 70% of China was up and running as of March 9th, compared to the 36% average in February. I also believe that spending is simply being deferred because of the virus and once we are past the worst wallets will again be opened.
Yesterday, the Chancellor reassured the country that we have the financial resources to get through this period and we undoubtedly do. His pledge to ensure that small businesses are able to access funds to tide them over this period was welcome as no doubt those in the hospitality and travel trade will suffer a short term hit. It is also likely our economy will shrink this quarter and we will hear talk of recession.
As for the markets, for a number of days now it resembles watching a fight break out in a public bar. It creates anxiety for those on the side-lines but unless you actively get involved you are unlikely to get hurt. The knee jerk reaction is to try and do something but those that do try and subdue matters often end up getting hurt more than the ones that started it. That is why sitting tight is I believe the only course of action. Trying to time when to get in and out of the markets is nothing more than guesswork and we are not in the business of guessing when it comes to our clients finances.
Bear that in mind as you watch the carnage ensue. Let the traders throw their punches in the markets. Realise that it is only if you were to disinvest right now that the price that is being quoted is the one you would get and like a pub after a fight, once the dust settles and the mess cleared up we can all get back to having a quiet drink which thanks to our new Chancellor is no more expensive than it was before the Budget!