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Market Update - 9th April 2020

Global equities fell 13.7% in March, bringing an end to the worst first quarter on record, and the longest bull market run on record. It was an extraordinary month; the spread of both coronavirus (COVID-19) and the accompanying panic brought huge changes to families, lifestyles, economic functionality and financial markets. From a peak on 19th February to the trough on 23rd March, the S&P 500 experienced its sharpest fall in history; 33.9%. This was immediately followed by the best three-day run since the 1930s. March saw enormous upheaval, and disruption that is now attempting to be reflected across analysts’ estimates; themselves hugely distorted by the speed at which financial markets have moved, the swiftness of policymaker reactions, and the rate of adoption of recessionary rhetoric.

Predictions for the impact of COVID-19 on the global economy range vastly, and the disparity doesn’t stop there. Forecasts for GDP are currently as disparate as those for the virus’ trajectory, but it is without doubt that the current situation will leave a mark for individuals and alter attitudes and behaviour.

The enormous, and relatively coordinated, policy responses by Western governments aim to soften the blow from COVID-19, to prevent companies from going into default and preserve household incomes. The policies have also given investors much to cogitate in terms of economies’ trajectories from here. Unlike the quantitative easing packages announced following the 2008 financial crisis, the support offered today aims to find its way more directly into the pockets of consumers through targeted fiscal and monetary policies.

Talk of recession amongst economists has developed into the prospect for economic power to shift from West to East, with the emergence of China from its shutdown a potentially pivotal moment in the eyes of some, and the country’s re-bound to a fully-functioning economy is being watched by the rest of the world. China’s manufacturing data had been keenly expected by investors towards the end of the month, to determine whether a recovery had been nascently accomplished.

China’s official manufacturing PMI dropped to 35.7 in February from January’s level of 50. Optically March’s subsequent increase to 52 was pleasing, however digging into the calculation and the subcomponents shows only a modest improvement in March activity despite a return to work for many and an improving picture for dailyreported COVID-19 cases. A return to normal may not, perhaps, be as simple as expected.

There is, without doubt, further volatility to come owing to the unpredictable nature of the pandemic coupled with the complete shutdown of many economies, yet also due to human nature and the unpredictability this brings. Corporate earnings for the first quarter of this year will allow for a clearer picture to form of the impact of COVID-19. The re-evaluating of company guidance for the year will provide opportunities to gain a foothold on the route over this obstacle and clarity on our future positioning.

We see data from parts of Europe and from China that make us more optimistic on the efficacy of lockdown measures, and news on vaccines along with antibody tests help provide light at the end of the tunnel in terms of economic resurgence. Our Investment Team meet daily and will continue to scrutinise the situation; positioning ourselves accordingly for what is likely to be a very unpredictable period.

We hope you remain safe and well throughout this period.

James Hambro & Partners LLP is a Limited Liability Partnership incorporated in England and Wales under the Limited Liability Partnerships Act 2000 under Partnership No: OC350134. James Hambro & Partners LLP is authorised & regulated by the Financial Conduct Authority. Registered office: 45 Pall Mall, London, SW1Y 5JG. A full list of partners is available at the Partnership’s Registered Office.

Opinions and views expressed are personal and subject to change. No representation or warranty, express or implied, is made or given by or on behalf of the Firm or its partners or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this document, and no responsibility or liability is accepted for any such information or opinions (but so that nothing in this paragraph shall exclude liability for any representation or warranty made fraudulently). The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies. You should be aware that past performance is not a reliable indicator of future results. Tax benefits may vary as a result of statutory changes and their value will depend on individual circumstances

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