The Economy

The UK has entered a recession. Officially. With economic figures confirming a second consecutive quarter of negative growth, Covid-19 lockdown restrictions have clearly taken their toll. But there is cause for optimism. As Nutmeg’s chief investment officer James McManus reveals, the markets are bouncing back, and policy-makers are committed to ensuring a ‘robust, medium-term recovery’. Looking at other investor news, James also examines the competing narratives behind gold’s recent record spike and the viability of investing in mortgage backed securities.

June was a volatile month for markets. Continuing uncertainty around the economic impact of coronavirus was offset by a strong employment rebound in the US. In the near-term, our investment team continues to keep a close eye on Brexit negotiations and the US presidential election. 

The UK economy shrank by more than 20% in April due to the ongoing impact of coronavirus.  It’s a  big drop , but  it was expected, says Brad in this month’s update. On the positive side, the crisis has led  many  firms  to discover  efficient  new ways of working, which  may have  profitable  long-term effects. Elsewhere, the US economy is likely to rebound because it is flexible, while emerging markets face challenges.  

The short-term inflationary pulse is very weak, and yet we’ve reason to believe underlying inflation will return to the 2% government target in the medium-term.

Why are savings rates so low? Will they ever return to their pre-financial crisis levels? And what should I do with my money? Answers to these questions and more…

It may not feel like it, but after a difficult month for markets in March, April was a better month for investment returns. A rise of about 11% in global equities only partly offsets the drops already caused by the coronavirus crisis, but the rebound has been gratefully received by disciplined investors who stayed the course. Financial markets still had surprises for us, such as the brief, puzzling phenomenon of negative oil prices. 

News of negative oil prices has been prominent in the news worldwide this week – something that was not even thought possible by most investors just a few weeks ago. It is not the first time we’ve seen unusual movements in financial assets. After all, negative bond yields were once seen as irrational and are now common. Nevertheless, a negative oil price certainly catches attention.

Most forecasts agree a recession is looming. But what type of recession? In our latest update, Pacome Breton from Nutmeg’s investment team explains why the external nature of this recession can be a cause for optimism. We also discuss the volatile oil price, US-China trade negotiations and, of course, Brexit.

March was an exceptional month. The US stock market suffered its fastest bear market in history, while the stock market in the UK witnessed its biggest one-day fall since 1987. But there was upward volatility too. Near the end of the month, many developed stock markets rebounded. Clearly, Covid-19 has had profound effects on the global economy and to everyday life, including for Nutmeg staff. In line with the UK government’s guidance on social distancing, our teams are working remotely, and we filmed this month’s update over the web.

Following a less than stellar start to the year, oil markets opened this week in a rattled state. The price of crude oil fell by over 30% on Monday, sending financial markets into a frenzy. Four factors coincided to cause this tumble.

When markets opened on Monday, the price of crude oil fell by the largest amount in a single day since 1991. The sudden price drop came on top of investors’ concerns about the coronavirus, resulting in a bad day for stock markets, with negative performance for many portfolios. In this blog we try to explain what’s happened between Russia and Saudi Arabia to prompt the sudden fall in the oil price.