As the Covid-19 death rate falls, and we start to creep back towards some sort of normality, there are still many important issues which don’t seem to be part of the wider public debate.
o The indirect health impact of the lockdown measures: all those people with tumours and chest pains and abscesses who just aren’t being seen or treated. Like everything else associated with this virus, the data is scarce, patchy and caveated, but there does seem to be a part of the “excess death” rate (the amount by which deaths exceed the seasonal average) that is not attributable to Covid-19.
Anecdotally from doctor friends, with different specialities, I’m hearing of dental emergencies of the sort that are normally seen in remote communities in the developing world, people too frightened to go to the GP with symptoms of heart attack, ignored leg infections that could lead to amputation. I don’t know what the answer is, how to best balance the need to stop the virus spreading with the wider health needs that are exactly the same as before, but it would be useful to see some sort of fact-based debate, and perhaps a nuanced message that gives people some idea of how to balance all the risks to their long term health, not just the virus.
o How much personal freedom are we prepared to give up to conquer the virus? In South Korea they use not only temperature scanners in the streets, but facial recognition technology to immediately quarantine all those with suspected infection. On the basis of figures from the European Centre for Disease Control, South Korea’s death rate is 0.0005% of the population, compared with 0.055% for the UK (Note 1). Assuming there’s some degree of connection between the degree of surveillance and the death rate, which option is best for our society? Most likely not the South Korean one, but it would be good to discuss it.
o Just how will governments worldwide unravel the massive fiscal and monetary stimulus they are using to tackle the pandemic? Can they inflate their way out? Will they raise taxes? Are the proponents of Modern Monetary Theory correct, and it simply doesn’t matter?
o To what extent are governments going to bail out insolvent companies with public money? And if they do, what form will that take? Which companies and sectors will they back? Will it be through the form of loans, that have to be paid off, or an equity stake, or just free money?
o What are the changes we need to make to our way of life and our way of business to prevent All This from happening again? When another atypical pneumonia starts up, how prepared are we to immediately isolate, to close our borders and to renege on contracts?
We have some massive unknowns to cope with, both financially and as societies, much more complex than taking the decision to lock down most of the world to slow the spread of the virus. In many cases, we need to be brave enough to say we just don’t know.
We have no idea how the unravelling of the stimulus will work out. We have no idea how many small businesses will close for ever, how many jobs will be lost, whether we will ever go back to the cinema, or if anybody over 75 will be brave enough to get onto a plane or cruise ship. Will there be a vaccine? Will the virus, like flu, change a little bit every year so we need a succession of new vaccines? Or will it turn out to be the case that masses of people are just not affected by it, have already been exposed, and have not even noticed? Will we become a two-tier society, with the young and healthy leading normal lives, while the elderly and unwell live in permanent semi-seclusion?
On 22nd May, HMRC published a report on tax and NIC receipts (Note2), noting that tax receipts were down for the month of April by £25.9 billion, about 4% of the annual tax receipts. Apart from the large number, what was also striking was that they simply didn’t know (and how could they?) “how much of the observed fall in tax receipts relates to changes to the timing of payments and how much relates to changes in the underlying economic activity.”
Let me be clear: I’m not pessimistic. There are many possible good outcomes. There are opportunities, we will adapt, we will find new ways of thriving, whatever the virus throws at us. We will all become smarter at working out our personal levels of risk, and adjusting accordingly. It’s even possible that we will keep our lockdown resolutions about leading simpler, less stressful lives.
We are undoubtedly living in times of increased uncertainty. One of the key tasks of financial management is not simply trying to get the best returns, but comparing the risk of loss to the potential chance of gain, and taking account of the client’s own ability to withstand losses, and willingness to suffer those losses.
It is quite possible that we have seen the bottom of the Covid-related slump in investment markets. However, the great unknowns still carry significant risks which could cause markets to fall again. For some investors, who can afford to lose money and are happy to take risks in the pursuit of higher gains, now could be the time to jump in with fresh cash. But for people who don’t want to lose money, particularly those investing new cash right now, the risks may well outweigh any possible gains.
This article does not constitute advice, and no action or lack of action should be taken as a result of what is written. You are strongly advised to consult your financial adviser or a solicitor before taking any action relating to the matters discussed in this article. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Sources:
2: Office for National Statistics HMRC Tax and NIC receipts May 2020