Market performance in “living with viruses” : An exploration of the UK model

Spark Global Limited reports:

Since the outbreak, the UK has adopted three rounds of lockdown and relaxation. On July 19, 2021, the UK announced a full reopening (Figure 1), with the removal of mandatory masks and social distancing of more than 1 meter. Prime Minister Boris Johnson has called for “learning and novel Coronavirus”, which we believe is largely due to the potential impact on the popularity of Johnson and his Conservative cabinet if the harsh response to the coronavirus results in lower UK economic and employment figures.

Globally, the UK’s blockade is less stringent than that of China, Israel and Singapore (FIG. 2).

The full reopening of the UK has gone through a “four-step” process. On February 22, 2021, British Prime Minister Boris Johnson announced a four-step gradual relaxation of prevention and control measures in England (Table 1).

Specifically, the “four-step” plan is a gradual relaxation of activity venues, including schools, outdoor sports, non-essential retail, and cinemas.

Despite the worsening of the outbreak over the winter, Britain has no plans to renew its lockdown. Since the start of the winter season (October and November 2021), the NUMBER of new confirmed cases in the UK has exceeded 40,000 in a single day. Especially as Christmas approaches, there are concerns that the epidemic will once again “get out of control” in the UK. Recently, the severe infection rate and death rate in the UK have risen (Figure 3 and 4), and the British Government’s Scientific Emergency Advisory Group (SAGE) has put forward a “Plan B” for epidemic prevention and control (Table 2), advocating the resumption of wearing masks in public places, working from home as much as possible, and not entering public places without a “vaccine pass”, etc.

However, judging from recent comments by Prime Minister Boris Johnson, the UK is unlikely to adopt a more stringent “Plan B” even if there is a greater risk of a resurgence. According to a report by Politico and The Daily Telegraph on October 26, 2021, the UK Treasury’s internal assessment of “Plan B” would cost the UK economy between 11 billion pounds and 18 billion pounds and “would not do much to help prevent the disease”.

Immigration policy: The UK is the first developed country to relax the immigration policy, and it is still in the process of relaxation.

Since September 2021, some developed countries have begun to relax their entry policies. For example, Canada has been fully open to eligible fully vaccinated travelers from September 7, 2021, and exempted from the 14-day mandatory quarantine requirement. From 4 October 2021, travellers who are fully vaccinated and have tested negative for nucleic acid after entry will be exempted from isolation. The UK entry policy continues to be relaxed (Table 3).

Since the outbreak, the UK has adopted three rounds of lockdown and relaxation. On July 19, 2021, the UK announced a full reopening (Figure 1), with the removal of mandatory masks and social distancing of more than 1 meter. Prime Minister Boris Johnson has called for
Since the outbreak, the UK has adopted three rounds of lockdown and relaxation. On July 19, 2021, the UK announced a full reopening (Figure 1), with the removal of mandatory masks and social distancing of more than 1 meter. Prime Minister Boris Johnson has called for “learning and novel Coronavirus”, which we believe is largely due to the potential impact on the popularity of Johnson and his Conservative cabinet if the harsh response to the coronavirus results in lower UK economic and employment figures.
Globally, the UK’s blockade is less stringent than that of China, Israel and Singapore (FIG. 2).
The full reopening of the UK has gone through a “four-step” process. On February 22, 2021, British Prime Minister Boris Johnson announced a four-step gradual relaxation of prevention and control measures in England (Table 1).
Specifically, the “four-step” plan is a gradual relaxation of activity venues, including schools, outdoor sports, non-essential retail, and cinemas.
Despite the worsening of the outbreak over the winter, Britain has no plans to renew its lockdown. Since the start of the winter season (October and November 2021), the NUMBER of new confirmed cases in the UK has exceeded 40,000 in a single day. Especially as Christmas approaches, there are concerns that the epidemic will once again “get out of control” in the UK. Recently, the severe infection rate and death rate in the UK have risen (Figure 3 and 4), and the British Government’s Scientific Emergency Advisory Group (SAGE) has put forward a “Plan B” for epidemic prevention and control (Table 2), advocating the resumption of wearing masks in public places, working from home as much as possible, and not entering public places without a “vaccine pass”, etc.
However, judging from recent comments by Prime Minister Boris Johnson, the UK is unlikely to adopt a more stringent “Plan B” even if there is a greater risk of a resurgence. According to a report by Politico and The Daily Telegraph on October 26, 2021, the UK Treasury’s internal assessment of “Plan B” would cost the UK economy between 11 billion pounds and 18 billion pounds and “would not do much to help prevent the disease”.
Immigration policy: The UK is the first developed country to relax the immigration policy, and it is still in the process of relaxation.
Since September 2021, some developed countries have begun to relax their entry policies. For example, Canada has been fully open to eligible fully vaccinated travelers from September 7, 2021, and exempted from the 14-day mandatory quarantine requirement. From 4 October 2021, travellers who are fully vaccinated and have tested negative for nucleic acid after entry will be exempted from isolation. The UK entry policy continues to be relaxed (Table 3).
Economic performance: The economic structure of the UK has improved after the comprehensive deregulation, but it is not an overall improvement. Specifically, it has the following three characteristics:
(1) Service consumption replaces commodity retail. As shown in Figure 5 and 6, retail entertainment and transportation activities in the UK have recovered further since the full opening up, the flow of restaurant customers has risen above the pre-epidemic level, and the service industry has significantly improved. On the other hand, it also has a certain impact on commodity retail sales. The two-year compound growth rate of the UK retail sales index since the third quarter is lower than that of the second quarter.
(2) Improved employment. The recovery of the service sector after the full reopening of the economy has significantly boosted employment, and the UK unemployment rate has fallen every month since the third quarter.
(3) Business survey is not optimistic. Despite the significant improvement in services and employment as a result of the lockdown, surveys of sentiment over the past month suggest that British consumers and businesses are not optimistic about the future prospects of the economy, possibly due to fears of a renewed outbreak of the coronavirus.
Asset performance: Since the full re-opening, the British financial market as a whole presents “stocks up and bonds down”.
The overall stock market rose steadily, among which the sectors that outperformed the market (+ 6.9%) included energy (+26.8%), industrial (+15.4%), and financial (+11.2%). We believe that the rise in energy stocks is mainly due to the expectation of a strong rebound in energy companies’ earnings under the energy crisis. And the industrial and financial sector rose to reflect the market after the full release of economic recovery expectations.
In addition, the reopening was positive for consumer discretionary stocks, but consumer staples stocks fell. The bond market experienced a process from Riskon to Riskoff. After the UK’s full re-opening was announced in July, the market’s expectations of economic recovery increased and bond yields rose. Bond yields have fallen since October as severe illness and death rates have rebounded and bond markets have responded to Price in’s fears of a new outbreak.
Overall, the contribution of the UK’s “live with the virus” model to industrial production, services and employment improvement is clear, while also bringing some investment opportunities to financial markets. However, it is undeniable that this model caused the re-spread of the epidemic in the UK, and the severe disease rate and death rate increased. In terms of foreign entry policy, since the relaxation of the UK has not been for a long time, its economic impact needs to be further tracked.
Risk alert: Novel coronavirus mutation, vaccine failure, outbreak of confirmed cases and return to economic lockdown

Economic performance: The economic structure of the UK has improved after the comprehensive deregulation, but it is not an overall improvement. Specifically, it has the following three characteristics:

(1) Service consumption replaces commodity retail. As shown in Figure 5 and 6, retail entertainment and transportation activities in the UK have recovered further since the full opening up, the flow of restaurant customers has risen above the pre-epidemic level, and the service industry has significantly improved. On the other hand, it also has a certain impact on commodity retail sales. The two-year compound growth rate of the UK retail sales index since the third quarter is lower than that of the second quarter.

(2) Improved employment. The recovery of the service sector after the full reopening of the economy has significantly boosted employment, and the UK unemployment rate has fallen every month since the third quarter.

(3) Business survey is not optimistic. Despite the significant improvement in services and employment as a result of the lockdown, surveys of sentiment over the past month suggest that British consumers and businesses are not optimistic about the future prospects of the economy, possibly due to fears of a renewed outbreak of the coronavirus.

Asset performance: Since the full re-opening, the British financial market as a whole presents “stocks up and bonds down”.

The overall stock market rose steadily, among which the sectors that outperformed the market (+ 6.9%) included energy (+26.8%), industrial (+15.4%), and financial (+11.2%). We believe that the rise in energy stocks is mainly due to the expectation of a strong rebound in energy companies’ earnings under the energy crisis. And the industrial and financial sector rose to reflect the market after the full release of economic recovery expectations.

In addition, the reopening was positive for consumer discretionary stocks, but consumer staples stocks fell. The bond market experienced a process from Riskon to Riskoff. After the UK’s full re-opening was announced in July, the market’s expectations of economic recovery increased and bond yields rose. Bond yields have fallen since October as severe illness and death rates have rebounded and bond markets have responded to Price in’s fears of a new outbreak.

Overall, the contribution of the UK’s “live with the virus” model to industrial production, services and employment improvement is clear, while also bringing some investment opportunities to financial markets. However, it is undeniable that this model caused the re-spread of the epidemic in the UK, and the severe disease rate and death rate increased. In terms of foreign entry policy, since the relaxation of the UK has not been for a long time, its economic impact needs to be further tracked.

Risk alert: Novel coronavirus mutation, vaccine failure, outbreak of confirmed cases and return to economic lockdown

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