The markets are experiencing some volatility at present so we thought we’d take a look at this and also what the ending of restrictions in England may mean for the economy.
What does the lifting of restrictions look like?
Ending restrictions in England will mean the end of enforced self-isolation.
While Boris Johnson has said that he doesn’t recommend anyone going to work with an infectious disease, people will have to make the call for themselves regarding how long they remain at home, as we experience the removal of legal obligation and fines associated with isolation.
There are no plans to end free Covid testing right now, but there may be in the future1.
Will the economy recover?
In February, it was reported that the economy grew in 2021 by 7.5%, outperforming expectations2. A slowing down was experienced in December 2021 with the emergence of the Omicron variant. Despite that, overall last year the UK economy had the fastest pace of growth experienced since 1941.
This was a healthy rebound to the 9.4% slump experienced in 2020, and the level of growth seen outperformed the other G7 nations2.
However, the Bank of England has recently cut its growth forecast for 2022 from 5% to 3.75%, as well as predicted that consumers are expected to experience a sharp fall in living standards this year as interest rates and inflation continue to rise2.
Will travel return to normal?
For now, some travel restrictions are likely to remain, such as quarantining for unvaccinated passengers if they test positive after arrival1.
Tourism in the UK has struggled in the first quarter of this year as Omicron has brought about large numbers of cancellations; a third of businesses surveyed said they had lost at least half their bookings for domestic breaks between January and March this year3.
The Government has put plans in place to help domestic tourism reach pre-pandemic levels by 2022 and international tourism back to pre-Covid levels by 20234. But it’s unclear for now how long the exact recovery period may be.
What is happening in the markets?
There is a lot to factor in when it comes to looking at the markets currently.
Over the last few months, as we have reported, there have been record rises of inflation, meaning base effects have been more difficult to compound against.
Also, a receding of the perceived market risks around the Omicron variant has resulted in movement away from higher growth assets into more value and cyclical areas, such as energy. Indices exposed to these growth areas have been affected, whilst those less exposed have outperformed.
While some funds are currently experiencing some fluctuation and volatility, it is always worth remembering that markets are cyclical, and the long-term trend is key when looking at fund performance.
Our investment manager, Brooks Macdonald, have informed us that it expects inflation to begin normalising over the course of 2022. It has also highlighted to us the need to maintain balance in the portfolios, something that has been particularly important during Q1 of 2022.
