Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Yesterday, Professor Chris Whitty described the UK’s rising infection levels as “a six-month problem that we have to deal with collectively”. His bleak outlook was, however, tinted with a shade of optimism - though we should certainly prepare for a winter of discontent, the point was that this was “not indefinite”.

Nevertheless, markets have understandably focussed on the negatives. £50 billion was wiped off UK stocks, while global markets too reel from mounting virus fears, with the US S&P 500 falling yesterday and Asian stock markets following suit this morning. Whitty’s comments have paved the way for a new 10pm curfew on all pubs and restaurants in England and a tonal shift in favour of home working once again.

Uncertainty will be a key theme for the remainder of this year - and global markets are likely to react accordingly. In the face of ongoing volatility, it remains key not to panic, to remain diversified, and remember that market falls are inevitable over the course of your investing career. To help you stay prepared, here are five key themes which are likely to have an impact on your investments over Q4.

1 - Lockdowns and curfews

Local lockdowns are firmly entrenching their place in this ‘new normal’. The 10pm curfew, on the other hand, is something new, and it’s likely to further disrupt the already struggling hospitality sector.

Sir Bernard Jenkin, a senior Conservative backbencher, explained that the new measures would put a “terrible strain” on pub owners. Many had just about scraped through the summer months when infection levels were low enough to allow indoor dining, and those with pub gardens enjoyed the warmer weather. Neither is assured over the colder winter.

It’s likely that government responses over the next six months will become increasingly reactive - as ever, ensuring that your portfolio is well-diversified enough to absorb those shocks is key.

2 - End of the furlough scheme and its impact on unemployment

Last week’s unemployment figures revealed that redundancies had risen by 48,000 on the last quarter, up from 3.9% to 4.1%. Unfortunately, that’s a trend which is likely to continue over the remainder of 2020, as the government winds up its furlough scheme. Just today, Premier Inn owner Whitbread announced 6,000 job losses, while pub-chain JD Wetherspoon has told its staff who work at airport venues that up to 450 could be made redundant.

It’s clear that some further action will be required to stem that rise. Though the chancellor insists he will not extend the furlough scheme, he has hinted at ‘creative’ alternative measures, and earlier this week announced that he will extend the Treasury’s UK-wide programme of business support loans.

Job cuts grab headlines and provoke concern among investors, but right now many companies are looking desperately for any way to shore up balance sheets ahead of the gruelling winter. Clearly things aren’t going to be ‘normal’ in six months’ time, but if Professor Whitty is correct, the worst of companies’ suffering should be relatively short term. Away from graphs and charts, workers as a whole will hope he is right.

3 - Autumn statement

The Chancellor is expected to deliver his budget this Autumn, much of which will reportedly concern tax rises to fund the coronavirus bailout. Capital Gains Tax (CGT) could be one of the risers, amid suggestions that it should be increased from the current flat rate of 20% to 28% or to align with income rates (up to 45%). CGT is a fairly easy target - the current rate is widely considered to be too favourable - but it’s also unlikely to come close to the touted £20 billion the Treasury wants to raise from increased tax revenue.

Other suggestions include cutting pension tax relief so that everyone receives relief at 20% or 30%, instead of remaining in line with income tax, or increasing corporation tax from 19% to 24%.

However, as you might have guessed, there’s a lot of uncertainty surrounding the statement. The above suggestions are probably teasers dangled before taxpayers to see which provokes the greatest backlash. Increased corporation tax, in particular, could strike the wrong chord at a time when companies may be feeling the strain most. It’s unclear whether the Budget will even go ahead - last year’s was cancelled after Boris Johnson called the winter General Election.

4 - Retail rush to Christmas

It’s looking like a merry virtual Christmas this year, with shoppers likely to flock online rather than the high street to satisfy their festive needs.

Many companies will be pinning their hopes on the usual Christmas rush. And while last week’s retail figures appear encouraging - sales were up 4% from where they were in February pre-pandemic - total retail sales volumes still fell 4.8% from January to August compared with the same time last year. Perhaps most telling was the breakdown by store type - non-store retailing volumes were 38.9% above February’s levels, while clothing stores were down 15.9%.

And while spending over Christmas may resemble this Summer’s uptick, which was driven by savers’ pent-up demand, it is still likely to fall overall. The end of furlough will reduce household saving levels, and the gap between the companies and sectors that boast a strong online presence, and those that don’t, will likely widen.

It’s likely too that we’ll see a rise in company mergers, as stronger businesses begin to pluck off competitors cheaply - Nvidia’s proposed takeover of Arm, the UK’s biggest technology company, could be the first of many.

5 - A more optimistic 2021 and vaccine hopes?

All of which brings us back to that tinge of optimism lurking among Professor Whitty’s words yesterday.

Global markets have generally responded directly in line with vaccine expectations - when hopes have risen, so have markets. Heading into 2021, when we edge (hopefully) nearer to a vaccine, stocks are likely to paint a more optimistic picture too. It’s clear that a vaccine won’t immediately rid us of the pandemic, just as it also won’t cure the economy of all its woes. But it may relieve some of its burdens.

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Topic covered

Shares; UK; Volatility

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