Market Report 22nd June 2020
A round up of the markets since lockdown in the 4 investment categories of Business, Property, Shares and Bullion
Business – With many countries now able to open shops attracting shoppers back onto the streets is proving difficult. The fear culture that kept many home during the lockdown is the same fear preventing many from going back into the shopping centres and high street. A string of well known brands went into administration during the lockdown which means many favourites and reasons to hit the high street no longer exist. Shop capacity is having an impact with many shops operating within 50% - 75% of normal capacity for shoppers. Online shopping is in a boom time and likely to continue for some time.
Whenever there are difficult times there tends to be a growth in network marketing businesses and cottage industries. This crisis has been no different with both these industries growing over the past few weeks.
Property – will traditionally drop during difficult markets but the past week has seen property rise in many countries. UK has been stunned at the demand for property as Estate Agents and Rental Agencies are permitted to open. The low interest rate at 0.1% in UK offers good opportunities to get into the property market.
In Spain, property prices have varied depending on where the virus was most active. In regions such as Madrid, heavily affected property prices have dropped on average 1.8% but in regions such as Murcia, one of the least affected by the virus property prices have increase with properties rising in value between 6% - 13%
Shares – remain very volatile with some of the gains initially recovered, following lockdown, starting to ease back again as fears of a second wave affect confidence. The impact on shopping has affected the prices of retail shops. The market is favourable for Value Investors with many undervalued companies. Dividend investors have had dividends affected with some companies delaying payout of completely missing payments. The current markets are still more favourable to Traders rather than Investors.
Bullion – The past 3 months of lockdown has seen money flow into gold and silver. Gold has risen 9.73% and silver is up 33.33%. Silver tends to lag behind gold in activity but traditionally will outperform Gold in value. The current gold:silver ratio is 97.78 down from 120.48 a 3 months ago. This indicates silver is still the commodity to purchase.
Bonds - Central Banks have been issuing bonds at zero/negative interest rates to raise funds for the huge expenditure during lockdown
Quantitative Easing - still remains in force with many central banks as they pump liquidity into banks who will hopefully pass some of the funding on to support businesses.
Oil – prices are recovering following the shock drop and negative prices at the start of the lockdown. Iran shut down fields which helped to increase the price. Stock piling ready for the winter months has also helped increase the price. Prices still remain volatile offering good trading opportunities.
Interest Rates – Central Banks are indicating they want their buying programs to stop and reduce their asset holdings before increasing interest rates. However, the level of support through quantitative easing is still needed so it is likely to be a while before interest rates are increased providing inflation remains low.