Market Commentary – September 2020


The UK officially entered recession as Q2 GDP showed the economy to have contracted 20.4% between April and June after falling 2.2% in the first quarter of 2020. None of this came as a surprise to markets as it was wholly expected given circumstances, but the sheer scale of the decline in economic output is rather frightening. Data also showed the economy to have grown by 8.7% in June following May’s disappointing 1.8% monthly rise, showing the economy to be recovering at an increasing pace as lockdowns are lifted and activity begins to return to some level of normality. Bank of England governor now actively talking about using negative interest rates as the UK economy starts to recover, something never previously considered and going against conventional wisdom that rates should begin to move upwards as the economy recovers.

UK debt has now reached £2tn for the first time in history due to the spending accumulated amid the coronavirus crisis. Public sector net debt is £228bn higher than at the same point last year as the government has ploughed hundreds of billions of pounds into stimulus and rescue packages for the economy, and figures from the Office for Budget Responsibility suggest borrowing in the current financial year may reach as high as £322bn, roughly six times the amount borrowed in the previous financial year.

One potentially positive area of reform to come from the UK Government is an overhaul of the planning approval system for new homes to speed up the housing market recovery. In the most sweeping changes in decades, land will be approved for homebuilding when local development plans are passed, levies will be decided at the national level, and better-designed buildings will be fast-tracked. Changes to the planning system have been touted for years without coming into effect.


The eurozone economy fared reasonably well (in comparison to the UK) over the second quarter of 2020. GDP growth came in at -12.1%. Concern from here onwards centres on the unemployment rate, which is set to increase as governments roll back their support for employees over the coming months. Many in the euro area though are committing to continuing these schemes for fear that the consequences of not doing so will be too damaging. Certainly, keeping people in work is more optimal than allowing them to be on unemployment benefits.

The troubles of negotiating such important matters among so many different nations with their own competing agendas has been laid bare this year, as the EU sought to put a rescue package together to protect the economy from the coronavirus fallout. These troubles have far from vanished, even after the huge milestone in finalising an agreement for €750bn of grants and low interest loans. The so called frugal four in Europe, Austria, Sweden, Denmark, and Norway, are fighting to protect their budgets rebates, arguing that the level of support from the European Central Bank and via the EU coronavirus rescue fund, threatens to erode the value of their rebates, which were originally negotiated by Thatcher for the UK. Germany will use its share of the €750bn to avoid taking on additional debt, rather than as additional stimulus.

On the ongoing Brexit saga, European Union negotiators are becoming increasingly frustrated with the UK’s apparent lack of willingness to compromise on terms. Two big obstacles remain: fishing rights and the level playing field concept on trade, and particularly what subsidies Britain will be able to give businesses after Brexit.


The US continues to struggle with outbreaks of coronavirus, with the nation’s last-in-first-out approach to lockdown having proven less effective than hoped. With the upcoming election, Trump wants to be seen to have a handle on the situation and has even touted the fast-track approval of the UK’s leading vaccine development out of Oxford University.

Democratic presidential nominee Joe Biden has chosen his vice-presidential running mate for the upcoming US election this year, finally ending months of speculation. Biden, who committed to choosing a woman before he’d even won the nomination, chose Senator Kamala Harris, who has a history in law as a prosecutor and who will be the first black woman and first Asian-American to compete on a major party’s presidential ticket. With Jamaican and Indian heritage, Harris is seen as being key to gaining the black American vote who will play a vital role in Biden’s bid to defeat President Trump in November.

President Trump recently declared trade talks with China to be cancelled. These talks were scheduled to be held every six months under the phase one trade deal agreed between the two countries. Talks have since resumed, with the expectation that there will be no phase 2 agreement – certainly not anytime soon – and so any continuation of phase 1 is positive.


The economic outlook for Asia remains quite sporadic. China is now forecast to be the only country in the world to see positive economic growth in 2020, with an average target of 2% GDP growth. The country is all but rid of coronavirus and Wuhan, where the outbreak originated, has completely locked itself off from the rest of the world. The rest of Asia has been showing a gradual resumption in domestic activity since May when major lockdown restrictions were lifted. Many Asian countries seemed better prepared for an outbreak having dealt with similar in the past, including the SARS outbreak in 2003.

In what has caused outrage in the West, China arrested a Hong Kong media entrepreneur under the new Security law, accusing him of colluding with foreign states to undermine the Chinese government, and the first such major imposition since the law came into effect. This is China’s first display of strength since the new law was imposed, no doubt designed to show the world that Hong Kong, once a Western outpost in Asia, is no more than another state of China. The implications are far-reaching…

In Japan, the country’s longest-serving Prime Minister, Shinzo Abe, has resigned due to a chronic health issue. Abe confirmed that he was being treated for ulcerative colitis, the same condition that forced him to step down as premier back in 2007. Domestic Japanese stocks fell on the news which has thrown political uncertainty on top of the ongoing coronavirus and economic concerns. Abe’s signature stimulus policy, known as Abenomics, will also now be brought into doubt.

Please note: The opinions expressed in this update are those of A&J Wealth Management Limited only, as at the 1st September 2020 and are subject to change. The update is for information purposes only.

Featured Posts
Recent Posts
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
Search By Tags
No tags yet.
Follow Us