Hindsight is 2020 as storm clouds brew over August
It is not atypical for markets (and current events) to have a funny August, and with coronavirus second wave fears abounding this is unlikely to change in 2020.
August last year had its fair share of excitement. Let’s look back before we look forward.
In August 2019, we had Boris Johnson embedding himself in 10 Downing Street amid a chaotic hung parliament and pitched battles over Brexit. The start of the month brought heavy floods in the north of England while ONS data showed the first quarterly contraction in the UK economy since 2012. In the southern hemisphere, the Amazon rainforest burned vociferously.
At the end of the month, Jacob Rees-Mogg visited the Queen in a (subsequently proved illegal) attempt to prorogue parliament while pro-EU marches gummed up the capital. It was a heady time for British politics and global current events.
And yet, it was also a simpler time. But hindsight is of course 2020. There are some noticeable issues on the horizon for us though. The Government has its finger poised over the trigger to shut down so-called air bridges at the drop of a hat. The re-imposition of the 14-day quarantine for Spain came with just a few hours’ notice.
The decisiveness to act will be welcome in some quarters but it has annoyed a lot of holidaymakers who will now lose money by not being able to travel, and cause potential employment or childcare issues those who are already there and for whom quarantining is a significant imposition.
It will have also dissuaded others (myself included [Au revoir, Musée de la Moutarde à Dijon]) who will now defer plans for fear of a sudden change of direction.
Markets will likely have an ‘interesting’ month too. August tends to have a volatile performance record and fears over a second wave of coronavirus is already gnawing at investor sentiment. In 2019 the S&P 500 saw 11 +1% swings thanks to US-China trade tensions and a bond market recession signal flashing for the first time (correctly predicting it for the wrong reasons). August 2020 is likely to be no less of a puzzler.
August is not a month bereft of events either. The usual monthly happenings such as data publications go on, but we have something of a break from normal proceedings.
On 1 August the government will begin its tapering of the furlough program. The redundancies have been in full swing for a while now but this will likely not improve the situation. The Eat Out to Help Out scheme kicks off on 3 August. I shall be tucking into a government-subsidised pizza myself.
We have both A Level (13 August) and GCSE (20 August) results to contend with. Both have been arrived at under a cloud thanks to coronavirus, with no examinations used to determine what grades teens will be getting.
On 19 August we notably have the latest inflation stats, but this time it will set the rail fares price rise for the next year. With RPI down at 1.1% in July it could prove to be the lowest increase for rail fares since August 2015 when RPI was likewise 1.1%…not that anyone is really using trains at the moment!
And finally, we have the US Republican National Convention kicking off on 24 August. It won’t be anything other than a coronation for the incumbent President. But perhaps the starter pistol for his farewell tour?
Hindsight will tell. If you’re off on a break, godspeed and all the best from us here at MRM and CCM.