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McHardy Financial - Economic Update on 11 July 2020

I hope all is well with you.  We have now past the halfway mark in a turbulent 2020 and below I have provided some social and macro-economic bullet points as we head into the second half of the year.

Our advisers and support staff are available and remain committed to meeting your financial planning needs, and please do contact your adviser should you have any queries or require any assistance at this time.


The second quarter, which just ended is one which has imposed incredible anxiety, sickness and tragedy on a truly global scale.  It also demonstrated the efficacy of supportive Global Government policy to prevent an unprecedented decline in economic activity from imposing far greater hardship than has so far been the case.

After the first quarter saw many markets falling from all-time highs to a bear market in a few weeks, the second quarter saw the re-emergence of a bull market. The S&P 500 index soared more than 20 per cent over the past three months, notching up the largest rise since the final quarter of 1998.

There has been a marked improvement in market sentiment however there continues to be risks to global market, with the virus being the biggest and most obvious.  We also have the US election and Chinese geopolitical tensions. Despite these headwinds and risks, there is optimism towards equities because of the improving global economic recovery and hyper-accommodative monetary policy.

After the longest ever expansion, the US economy is looking like it is set to experience the shortest ever recession. Signs of life in the US housing market are positive whilst data coming out of China has been perceived as encouraging, with the service sector appearing to be enjoying a particularly solid rebound. The EU is moving toward a large recovery fund, political risk is in check, tensions between the ECB and German Constitutional Court are easing and there have been no signs so far of a second wave. All this implies the budding strength in the European economy is set to continue.  Of course, we are at the mercy of a virus which could set back a lot of the recent gains and positive data.

The virus remains the biggest risk to the global economy. It seems unlikely the US, which has seen a dramatic rise in cases in recent weeks, will impose a draconian lockdown.  The make-up of the US economy and society as well as the November Election make such a move seem unlikely.  It can only be hoped that cases ease off and we see the current wave of Virus subside in future weeks.

Joe Biden has widened his gap over Trump in the online betting markets, and the Democrats are increasingly favoured to win the Senate.  This raises the prospect of a unified Democrat government post the November election. Whilst this may help build consensus in US politics it would also likely see a reversal of some of the reductions in Corporate Tax Rates which have helped stimulate recent growth.

In his summer statement, the chancellor Rishi Sunak announced a series of measures designed to create and protect jobs and encourage confidence in a longer-term recovery from the coronavirus crisis. The focus, for now, is on preventing a spike in unemployment and reducing the impact of the pandemic on the next generation. The less economic scarring incurred now, the lower the ultimate bill.  However, any question of how that bill will be paid has been put off for now – decisions on tax rates and allowances which may be examined to help pay for the crisis could play a prominent part in the autumn budget later in the year.


Scotland is moving out of lockdown and hopefully this will allow us to phase an opening of our offices in August.  I also hope you can all enjoy some Government supported meals out at the same time!


If you have any questions about the content of this email please do not hesitate to contact your adviser.


Kind Regards,



Richard Fletcher


Chartered Financial Planner


For a no-obligation chat please contact our branches.
Aberdeen: 01224 578250 | Edinburgh: 0330 1079927  | Perth: 01738 718870 

Email: enquiries@mchb.co.uk

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