The global economy is experiencing the sharpest decline since the Great Depression, unemployment is surging, women's finances could be hardest hit, what is a recession, and check out money app Plum.
Welcome to our #14 weekly newsletter in 2020.
Every week we curate key articles and content so you can stay informed and inspired about money and investing without the boring bits!
This is your weekly go-to place to read up on all things money-related.
We spend hours sifting through content every week and apply a female-lens to news and content about money and investing so that it is meaningful to you.
Ultimately we want to support you in making well-informed financial decisions, grow your net worth and ensure your financial security.
Photo: Christina Morillo
From The Purse…
Editorial from the Founder
We live in unprecedented times: the global economy has come to a sudden standstill due to the coronavirus. Governments have put their countries under lockdown which means the global economy has ‘fallen off a cliff’.
Economists forecast that the global economy is set for the sharpest reversal since the Great Depression.
Unemployment has surged: in the US over 10 million Americans have filed for unemployment benefits since the second half of March. In the UK just under 1 million people have filed for Universal Credit.
We are likely to see the biggest decline in global GDP in the second quarter (April-June) but most economists are forecasting a sharp recovery from the third quarter (July-September).
However it’s fair to say that we do not know whether the economic impact of the coronavirus is going to be pervasive and extend well into 2021.
During this very challenging time, we are seeing companies fail especially in heavily impacted industries (retail, hospitality) whilst others thrive as consumers move online, such as video conferencing apps such as Zoom.
As an investor, it is important to understand the variables that impact industry sectors and the companies within them.
Please reach out to each other and help however you can.
If you’ve not heard of the Young Women’s Trust-please check them out. They have started an emergency fund for young women during this time. Every little helps.
Stay safe, take care of yourself and your loved ones.
I hope you enjoy this week’s newsletter. Until next week!
Jana
The Big Picture
Global markets and economy news, trends and indicators
The Coronavirus Effect:
The global economy is experiencing the sharpest downturn since the Great Depression in 1929.
According to the purchasing managers’ index, the UK’s service sector has experienced the fastest downturn since July 1996.
Pantheon Macroeconomics forecast on Friday that the UK economy could contract by 1.5% in the first quarter (Jan-Mar) and by as much as 13% in the second quarter (Apr-June).
This decline is twice as big as the 2008-2009 financial crisis.
Global growth was forecast at 3% and is now expected to be a contraction of 2.7%.
Europe’s economy is in free fall due to Covid-19. This is pointing to a deep recession across the EU countries:
China’s economic recovery: struggling to ‘get back to normal’
The world is watching China as it was the first country to be impacted by the coronavirus (December 2019) and has begun to lift its lockdown.
New services PMI data (purchasing manager’s index) shows that is struggling to get back to normal.
The sector had returned to expansion that the levels were no where near what economists expect from an Asian country.
Unemployment has risen very fast:
US: more than 10m Americans filed for unemployment benefits since the second half of March (6.6m filed in the last week).
UK: almost 1m have claimed for Universal Credit (up from 477,000).
The end of quarter stock market updates:
Wall Street finished the quarter down 20%; the biggest drop since the financial crisis.
London’s FTSE 100 fared worse: down 25%, the biggest decline since 1987.
Bank of England (BoE) ordered British lenders to cancel almost £8bn of dividends due to be made to investors this year and told banks to scrap bonus for the most senior executives.
Global stocks have lost $2.3trn in market capitalisation in the last week due to the negative economic data released. However the stock and bonds markets were calmer (than the previous few weeks).
Looking Ahead in 2020
According to Paul Dales, UK economist at Capital Economics: if the rate of unemployment increase continued at this pace, the UK unemployment rate could exceed 10 % by mid-April, a rate not seen in the UK for 26 years.
Bank of America now sees first-quarter GDP falling 7% and continuing that decline with a 30% drop in the second quarter. It will rebound slightly in the third quarter but still end up at -1%, according to the bank.
Bank of America thinks the fiscal response from Washington could total $3 trillion to $5 trillion, or 15% to 25% of GDP, pushing the deficit to unprecedented levels.
“…other stimulative measures such as a payroll tax cut or a major infrastructure bill could be needed to resuscitate the economy."
Coronavirus Impact: Your Money
Insights, trends and what this means for you and your money
4 things you can control with your money when it feels like everything's gone sideways (US):
How much you save:
try to maintain an emergency fund which covers 1 year of expenses.
Working towards your financial goals:
You may need to make detours and adjustments, but do not abandon your plans altogether (if you can).
Your insurance coverage:
Look into insurance coverage ge life insurance, critical illness, income protection.
Managing your debt:
You may be able to pause or defer your debt repayments. Speak to your bank.
Companies to Watch: winners & losers
Companies to watch and share price movements
According to a survey conducted by Revolut: (UK)
Spending on PlayStation more than doubled in March
Local convenience stores such as Nisa and Costcutter recorded a surge in sales
JD Wetherspoon, the pubs chain, was among the biggest losers in the UK.
The surprise winner was Moonpig: transactions at the online personalised cards company soared by 156% during the month.
At Pret a Manger, transactions were down 82%; at Nando’s they fell 78%.
Transaction volumes at Argos and Amazon rose by 20%
The figures also show a sharp decline in cash payments. Revolut said ATM withdrawals by its customers plunged by 83% last month.
Debenhams considers going into administration:
Debenhams’ owners have put restructuring firms on standby as they consider putting the struggling department store group into administration for the second time in a year.
Zoom boom as demand for video-conferencing tech grows:
Government lockdowns has means that demand for video conferencing has surged.
The rise price has risen whilst the global markets have sharply declined.
The app has been used to host virtual classrooms, church services, blind dates and stag dos.
Zoom Video Communication’s share price has soared from under $70 a share in January, before the coronavirus struck western countries, to $150 on Monday. That gives the company a market value of $42bn.
In the Spotlight
Is there a topic you'd like us to Spotlight? Please email jana@jointhepurse.com or tweet @jointhepurse
What is a recession?
A recession is defined as a decline in economic growth in two consecutive quarters (ie over a period of 6 months).
The total amount of goods and services produced-known as the Gross Domestic Product (GDP) would have to contract by a quarter on quarter basis.
As examples, in 1991 in the UK, GDP declined 1.4%
During the financial crisis 2008-2009, GDP declined 2.2%.
Have You Seen This?
Female-focused news, reports, research, campaigns
Female directors are quicker to recall dangerous medical products, study shows
Research found that compared to boards composed of all male directors, those with female members announce high-severity recalls 28 days faster, a 35 percent reduction in recall timing — truly a matter of life or death..
“Just one female director is insufficient to push firms to recall these serious problems more quickly….It takes at least two female directors to influence the timeliness of severe product recalls, and three moves things along even faster.”
Emergency fund launched to help young women in financial crisis during pandemic
The Young Women’s Emergency Fund will provide relief payments of £150 to young women aged 18-30 struggling to afford essentials such as food, utilities and rent for themselves and their families.
The Young Women’s Trust has donated £85,000 of its own money to the fund and is seeking to raise a further £50,000 to help women in England and Wales.
What We’re Tracking
Female-focused products or services, crowdfunding campaigns, start-ups and businesses led by female entrepreneurs & investment, research
Entrepreneur Alexandra Chong, has launched her newest venture Jacana: a medical cannabis company to bring relief to chronic pain sufferers.
Her company hopes to export organic medicinal cannabis to the UK before the end of the year.
“It’s a medical wellness company that is really looking at the approach around natural-based medicine,” she says. “I think this is very much in line with consumer appetite, that is, patients’ appetite in Europe, looking for more natural-based medicines.”
Money Habits of the Week
Do you have a money habit you would like to share with us? Tweet @jointhepurse
We all respond differently during uncertainty or if reeling from loss and financial pressure.
Keep a diary or journal where you write down how you feel and how this makes you feel about money right now.
Our emotions and beliefs often drive our money and investing decisions.
Continue to track your spending patterns.
And if you have enough in your emergency fund, consider how you might invest your money for growth.
Caught Our Eye
Digital tools for managing your money and investing
Plum: (UK)-an automated savings bot, which doubles up as a wealth-management app for millennials. It has over 650,000 customers.
Connect your bank account, Plum automatically sets money aside, and invest (via 10 pre-made funds which vary by risk level and genre).
Their smart algorithm analyses your spending and helps you set aside money automatically .
What We’re Reading
Read Economics The User’s Guide to understand the basic principles of economics and how capitalism works. Written by Ha-Joon Chang who teaches economics at Cambridge University.
Ha-Joon Chang has won the Wassily Leontief Prize for advancing the frontiers of economic thought, and is a vocal critic of the failures of our current economic system.
Coffee Break? Read This
The coronavirus is a disaster for feminism: the pandemic affects men and women differently
‘A perfect storm for first time managers’, says VCs with their own shops
Small businesses worry that Coronavirus loans are ‘too risky’ (UK)
Start-ups going to the wall as Rishi Sunak stumbles over Coronavirus rescue (UK)
Blackstone fails to make progress in the UK on the gender pay gap
We’d love to hear from you. Do you have feedback? Have we missed anything? What would you like to see more of? Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
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