Quarterly Review

Preparing for winter

David Wheildon / November 2020

In the current climate, uncertainty comes at many scales at once, with looming threats of further lockdown and a no-deal Brexit in the shadow of a significant US election vote. Balancing economic and human health is a challenge to hopes of growth, says David Wheildon, but the secret to staying warm in winter is methodical preparation.


The media headlines continue to be dominated by Coronavirus as we head towards an ever widening group of Tier 3 lockdowns, with the likelihood that we will all, to a greater or lesser degree, find ourselves back in the position we were in during the Spring. It is clear that the easing of restrictions over the Summer has led to a lack of restraint in certain sectors which has allowed the virus to spread at an alarmingly high rate.
Initially there was little evidence of serious impact, despite the thousands of new infections. However, more recently the numbers admitted to hospital have increased dramatically and there is talk of the return of the Nightingale Hospitals. Against this backdrop of an overwhelmed NHS it is no great surprise to see lockdowns return.

As we know, the problem with a lockdown is that it’s a very blunt weapon as, although it may be effective in limiting transmission rates, it’s also effective in limiting economic activity. Further, there are very distinct differences in the localised infection rates depending on which part of the country, county, city or even neighbourhood is being considered. It is very much not the case that “one size fits all” – but at the moment the Government seems to have a lockdown as their only course of action. Only when the population fully takes on board that it is everyone’s personal responsibility to be careful and prudent regarding infection and transmission – no matter what freedom may currently exist in their locale –that we will see a real “common sense” solution to this current crises.




The only good news on the coronavirus front is that markets are showing a decent degree of resilience which is reflected in most portfolios showing a positive return over the last 12 months. This is thanks to the stock picking skills of the fund managers with whom we are in regular contact. It’s too simple to say that they are “short British Airways and long Amazon” but as a microcosm, this represents the current extremes of economic activity in the commercial world.
There are also perhaps less obvious areas of profit. For example, the cardboard you might put out in your regular recycling is now in such high demand that thefts of recycling are occurring across the country. The demand for recycled cardboard has increased dramatically with the increase in on-line shopping as all firms wish to be seen to be using recycled materials whenever possible. I don’t believe many fund managers would have seen this coming but by now many have positions in recycling firms as they look to share in the uptick in profits in this sector.

We are not suggesting however that the markets are now entirely accepting and relaxed with the impact of coronavirus, but they are getting used to operating in a world in which it exits and this is providing a greater degree of stability than perhaps we might have expected.




Further afield the Chinese economy is recovering well and has seen an impressive increase in output over the last few months which may not please the current President of the United States but nonetheless is good news for the global economy. The election in America is now days away and it will be a close call; the markets are not particularly delighted by the prospect of either candidate but if pushed would prefer a 2nd Trump term.
In summary, we are still concerned by the balance between the health of the global population and the economy which, when allied to the more local Brexit issues suggests to us that we should prepare for the potential of a difficult winter in the markets. Some suggest that Boris Johnson always wanted a “No Deal” Brexit and at the moment there seems a real possibility that this will be the outcome.

With this in mind, and the potential economic turmoil it would cause, we feel the potential for profit must be balanced by a desire to maintain the returns generated over recent years and since the coronavirus shock of March this year. Fund managers are also keen to act a little more defensively and we feel this is the best way to manage investments in coming weeks. We expect managers to react very quickly when sentiment improves but for the time being it is time to hunker down and hold on.

This article is the opinion of David Wheildon, Director of The Legal Brokerage.


This article is the opinion of David Wheildon