OPINION27 July 2020

Facts stranger than fiction

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Covid-19 Impact Opinion

Lorna Tilbian looks at Covid-19’s impact on the financial markets and the wider economy.


We have seen things happen during this pandemic that would have been impossible to imagine in our wildest dreams.

  1. The longest 11-year bull market in history has (so far) been followed by the shortest 33-day bear market. From a market peak on 19 February to a trough on 23 March, the longest stock market boom seemingly paved the way for the shortest bust.
  2. Historically, investors lent their capital or property in return for interest, dividends or rent. Now governments can borrow for less than nothing, companies are taking advantage of the crisis to reduce or cancel dividends and paying the rent seems to have become an optional extra.
  3. Central banks responded to the viral and economic shock with unseen levels ($8tn) of stimulus, with the Federal Reserve cutting its funds rate to zero and even buying junk bonds. Similarly, the Bank of England reduced the base rate to 0.1% and the UK government raised £3.25bn of debt at 0.2%, which was over-subscribed, before issuing its first negative bond with a coupon of -0.003%.
  4. HM Treasury has become the biggest employer in the UK, with 8.4m people – 25% of the employed workforce – on furlough, costing up to £100bn in the eight months from March to October. Alongside this, the Coronavirus Job Retention Scheme (CJRS), the government’s various credit schemes from the Bounce Back Loan Scheme (BBLS) to the Coronavirus Business Interruption Loan Scheme (CBILS) and the Covid Corporate Financing Facility (CCFF), all inevitably mean future spending cuts or tax rises. Unless, of course, the government issues old-fashioned war loans to be repaid over many decades, of which the UK paid the last (£43m) tranche from World War II to the US in December 2006.
  5. In the US, Donald Trump is still hoping to win a second term in office despite overseeing worse fatalities (more than 100,000 ) than the war in Vietnam and the highest unemployment figures ( 40 million) since the Great Depression. Go figure, as they say Stateside.
  6. Royal Dutch Shell shook the markets by slashing its totemic dividend for the first time since World War II. The price of US oil turned negative for the first time in history on 20 April, plunging into negative territory of -$37 per barrel as demand dried up during lockdown across the world.
  7. Ironically, as the UK government was busy printing money, we were busy hoarding loo paper. However, despite the supermarkets being the major beneficiaries of our panic-buying and stockpiling – as well as the government’s reduction in business rates – both Sainsbury’s and Wm Morrison passed their dividends.
  8. In contrast, both Tesco and BP paid their dividends, which – following the accounting and horse meat scandals of the former and the Deepwater Horizon oil spill disaster of the latter – was just reward for their long-suffering investors’ patience.
  9. During lockdown, we discovered that working from home saves time and the environment, and survey after survey has shown that the vast majority of employees prefer it, but we are social animals and social distancing is unnatural.
  10. Iconic retail brands including J Crew, Neiman Marcus and JC Penney went into bankruptcy in the US, while in the UK, online retailers such as Asos and Boohoo had well-received cash calls. Indeed, so far more than £8bn has been raised for 55 UK companies, with share prices up on average by +15%.
  11. Very few, if any, corporate risk radars included infectious diseases as opposed to terrorism, cyber security, climate change or nuclear proliferation.
  12. Just as the regulator and taxman were moving on to the tech giants, they have become our great redeemers in the time of Covid-19, from online deliveries to online video conferences and online entertainment. If that were not enough, new apps to test, track and trace the virus puts them on the side of the angels. Pitched against our very survival, privacy seems a small price to pay.

As Lenin once observed: “There are decades where nothing happens, and there are weeks where decades happen.”

This column was first published in the July 2020 issue of Impact.