A BRAVE NEW WORLD?

So, how are you coping?  Well, I hope.

It is remarkable how quickly this new world we find ourselves in has seeped into our psyche.  We have a new vocabulary; “flattening the curve”, “second-wave”, “furlough” and “let’s open another bottle” are words used every day.  Watching pre-recorded TV programmes where people aren’t socially distanced seems weird.  

When I go on my daily walk it seems impolite to not venture into the middle of the road when passing someone on the pavement.  Thankfully the roads are pretty quiet, but by the look on some people’s faces, when the roads are busier it will be 50/50 whether they take their chances with the traffic rather than spend a nanosecond in the vicinity of another human. 

There is no doubt that people are in a heightened state of fear and for a lot of them understandably so.  The virus is very contagious and for a portion of the population catching it could have extreme consequences.  As a result I suspect, although we will get used to this, the way we lived our lives only two months ago will be some time in coming back.  

For us here at ASAM this means we are all working remotely and thankfully technology means this has been pretty seamless.  There is no doubt the biggest thing I miss is the daily repartee with the staff (whether they miss mine is another matter) but in terms of how we can deal with you it is business as usual.

Looking ahead I am always reluctant to make predictions as mostly they are at best a guess, however this is one I am sure will be correct.  It has already started but in the next few months, you will see the worst economic data on record being reported.  No doubt this will come with huge scary headlines and suggest financial Armageddon is upon us.  

Taking the emotive language away, the facts should come as a surprise to no one.  Governments globally have voluntarily shut down their economies, and the GDP figures can only be terrible.  Importantly markets know this as well, and unless it takes longer than anticipated to re-open the majority of the economy, or a severe second wave occurs, we have probably seen the worst, although volatility on a daily basis is still likely.  

The big question that is being debated is what shape will the recovery look like once the economies start to reopen?  The debate is between V, U, W or Nike swoosh shaped recovery and not a day goes by when I am not reading or listening to a boffin’s prediction. 

We have never experienced a “voluntary” recession before so the truth is nobody knows what it will look like on the way out.  However, given China were the first to suffer from the virus, maybe what has happened there will give us a clue.  

On the positive side, when the fashion giant Hermès reopened their flagship store it reportedly took in record sales of $2.7m in the first day!  The Chinese commentators have suggested that the urge amongst the population to treat themselves post-quarantine was one of the biggest reasons given for the sales record.  I can relate to that although I doubt it will be handbags I will be splurging on! 

Although the BBC website reported a 92% fall in Chinese car sales in February, I haven’t seen them report that sales in Wuhan immediately came back to pre-crisis levels as soon as they reopened, which shocked even the local car dealers.  The China Passenger Car Association (their AA) has said the industry is well on the way to a V shaped recovery.  I must have missed this piece of positive news being reported over here.

On the downside anything that involves socialising such as going to the cinema, restaurants and bars, although now open, is still well down in numbers which shows that even though you open social places a lot of people will not take the risk.  I suspect these types of businesses will be far more dependent on the speed of medical advances before they will get near their previous levels of customers.  

So China’s re-opening suggests the shape will vary for different sectors of the economy and the individual companies within them.  I expect our recovery will be similar with clearly defined winners and losers.  Sadly a number of businesses will probably go to the wall and in that respect this will be no different from other recessions.  

The good news is that times of crisis tend to hasten the greatest advances and this time will be no different.  The virus has acted like a fast forward button to our lives and has already brought a lot of changes that otherwise would have taken years to happen.  It will also spawn new businesses that will replace those that are unable to survive, to provide us the goods and services we will need in our new normal. 

We will endeavour to keep you as informed as possible as we all proceed on our journey into this new world, but for now stay safe, and if you need or want to contact us drop us an email, we would be delighted to hear from you.

This letter is the personal view of Steve Forbes.  Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.