So - have you heard? The pandemic is over. There’s a number of reasons to qualify that statement: firstly, the (fairly typical) path of mutation has, luckily, been followed. That is to say, the dreaded coronavirus SARS-COV-2 has become more transmissible (as if we needed that!) but a lot less fatal/deadly. This is how the Spanish flu ended (few people realise that the Spanish flu was actually H1N1, if those numbers sound familiar it might be because you remember H5N1 from back in the ‘noughties’, which was/is a descendent of Spanish Flu over 100 years ago.
That also gives us some clues about the future of these new, mutating pathogens and some caution over the statement “the pandemic is over”. I expect a whole number of wobbles, mostly media-hype driven, mostly on the basis of things we really all knew - just as we knew the pandemic would likely end in this way, just as we knew there would not be a 100% effective vaccine (to get a vaccine in itself, as fast as it was done, was incredible and that will not be forgotten for a long time). I for one grew up being told there was no “cure” for the common cold (also a coronavirus, remember) and there still isn’t, but there is now an effective vaccine for SARS-COV-2.
This does clear up one thing. Confidence - and confidence is huge in the world of decisions, which are ultimately what is aggregated to make an economy. Look at consumer spending, for example - decisions are made based on disposable incomes, job stability, inflation expectations - and this is the majority of money spent in any westernised/free economy. Investment decisions are similar - they can be influenced of course (remember the super-deduction announced in the 2020 budget - sure to go down as another very sensible Rishi policy, who has covered himself in relative glory - certainly compared to our great leader who has turned out to be more Churchill the dog from the insurance adverts rather than Winston Churchill) - and companies will invest when they feel confident about the returns they can get, and the future. Not entirely dissimilar to households but more formalised and structured of course.
Government spending can also be lumped in with that - although politics of course plays a huge role, as does whatever they think they can get away with at the time, plus what they think wins some votes! So confidence, overall is back. Except, it isn’t quite back yet. It is somewhat tempered by the issues overhanging the stock market and overall investment markets, because the bond market is wobbly (and frankly, with the yields where they are, deserves to be at least as wobbly as the stock market, despite some insane valuations), and alternative asset classes (crypto anyone?) also look “risk-off” at the moment.
This is a key time, where anything could happen, and indeed between writing and publication there could have been a major stock market event - we are on the precipice here of a significant drawdown, certainly in the US which has seen gains which no-one could really justify, even though a few commentators had a good go.
