No Place Like Home

The Covid-19 outbreak and shift to even greater internet usage is going to lead to some fundamental changes in our lifestyles in the years ahead – where we live and where and how we work. This will have a massive impact upon the global property market, particularly houses, offices and shops.

In Japan, technology firm Fujitsu has said it will adopt a ‘Work Life Shift’ programme that will offer unprecedented flexibility to its 80,000 workers with flexible hours and working from home becoming standard practice. The company estimates that this will reduce its office space requirement by 50%.

In the UK, the property sector has already seen a structural shift away from high street shopping to internet retailing and Covid-19 has accelerated this trend. Clearly, if more people can work from home then there will be a structural shift in the use of office buildings. If fewer people commute to work this will have positive environmental benefits but could adversely impact bus and rail providers, as well as convenience outlets that rely on footfall from commuters and office workers.

Turning to the UK housing market much of the population’s wealth is tied up in property and linked to house prices. With the government furlough scheme coming to an end and rising unemployment due to Covid-19, Chancellor Rishi Sunak is looking to provide support to the housing market by cutting stamp duty. The housing market may itself undergo structural change due to greater numbers working from home. Rightmove, the UK property website, has reported a significant rise in the number of people searching for homes further from town and city centres with larger gardens and space for a home office.

The government is keen to push ahead with infrastructure investment to stimulate the economy. Given the structural shift in the property market then the roll out of full fibre broadband and 5G should be a priority. This however is complicated by the current political spat with China over Hong Kong and Huawei.

What have we been watching?

Global equity markets have continued to look through the Covid-19 challenge with share valuations still pricing in a V-shaped recovery in the world’s economy in 2021. Markets continue to be driven by internet related business models with the US NASDAQ technology index hitting a new-high on the growth in US Covid-19 cases and the hope this drives an even more rapid adoption of online services. The five largest US technology stocks – Apple, Microsoft, Amazon, Facebook and Alphabet now represent 20% of the US equity market compared to 10% at the start of 2017. Investors will now be studying forward guidance statements as the US second quarter earnings season gets underway.

Chinese equities jumped sharply last week as retail investors were encouraged by state media which is now stressing the importance of a ‘healthy bull market’. Investors also responded positively to news that Beijing reported no new Covid-19 cases for the first time since the emergence of a cluster in June.

The number of global Covid-19 cases reached another new high over the weekend. The number of Covid-19 cases in the US continues to grow with record new cases in California and Texas. American infectious disease expert Dr Anthony Fauci said the country was still ‘knee-deep’ in only its first Covid-19 wave. Meanwhile, President Trump formally started the withdrawal of the US from the World Health Organisation. Cases continue to grow in other ‘hot spots’ such as Brazil where even President Jair Bolsanaro has tested positive. The challenges of easing lockdown measures were highlighted by Melbourne, Australia’s second largest city which, after a surge in cases, has re-entered into lockdown for six-weeks.

A Spanish study, published in the medical journal the Lancet has cast doubt on the feasibility of herd immunity as a way of tackling the Covid-19 pandemic. The study of 60,000 people estimates that just 5% of the Spanish population has developed anti-bodies. Meanwhile, in the UK, the Office for National Statistics said that 78% of people reported no symptoms by the time they test positive for Covid-19. This highlights the significance of asymptomatic transmission. However, it also demonstrates how under-estimated the infection rates in the UK are given those who do not produce anti-bodies will not be counted. Perhaps some encouraging evidence that the overall severity of Covid-19 is much lower than the sad mortality rates we see?

Hong Kong’s leader defended Beijing’s new security law and vowed that it would be ‘vigorously implemented’. Meanwhile, China’s ambassador to the UK warned that Britain will ‘bear the  consequences’ it if interferes with Hong Kong and equipment from Huawei is banned from the UK’s 5G mobile network. Meanwhile, the Trump administration is reported to be considering undermining the Hong Kong dollar’s peg to the US dollar as a way of punishing China over the new security law. This would limit banks in Hong Kong from accessing US dollars and if it were to happen could cause more upheaval in global markets. In an interview, President Trump suggested he was also considering banning China’s popular video- sharing app Tik Tok as a way to punish China for the Covid-19 pandemic. The deterioration in relations between the two super-powers was further highlighted last week by the director of the FBI, Christopher Wray who said that acts of espionage and theft by China’s government pose ‘the greatest long-term threat’ to the future of the US.


Turning to the Brexit trade deal, PM Boris Johnson is reported to be turning up the heat on Europe telling German Chancellor Angela Merkel that unless the EU compromises, the UK is happy to leave under World Trade Organisation rules. The EU has said it would need an agreement to be reached by October to allow time for a deal to be ratified by member states. Despite the posturing, Sterling picked up to $1.26.

Read our latest UK investment insights from Alpha PM


In the UK, Chancellor Rishi Sunak announced a number of small targeted measures to support the economy worth £30bn.  This included a £9bn ‘new jobs retention bonus’, a Kickstart scheme to create jobs for those aged 16-24 years, a £2bn Green Homes grant, a temporary holiday on stamp duty on the first £500K of house sales and a cut in VAT from 20% to 5% for the hospitality sector. The market took the announcements in its stride as they had been widely trailed and the stimulus, although large by historic standards, is less significant in the context of a government borrowing requirement of £300bn this year. The Institute of Fiscal Studies believes the economy will remain in a ‘support and recovery’ phase for some time but that higher taxes are inevitable. UK bonds and interest rate futures are having another go at foreseeing the move by the Bank of England to negative interest rates with the 2-year Gilt yield at minus 0.129% and the 10-year at just 0.125%!

A particularly downbeat report by accountants BDO and the Centre for Economics and Business research suggested that the UK’s GDP could fall by 11% in 2020 and that the economy might not recover to pre-pandemic levels until 2024 due to Covid-19 and Brexit hitting exports.

Read our latest EU investment insights from Alpha PM


In Europe, retail sales increased by 18% month-on-month in May following a 12% decrease in April. Construction across the eurozone picked up in June although the activity indicator remained in contraction territory. The European Commission expects the economy to contract by 8.7% in 2020, slightly worse than its last forecast in May and is expecting a ‘slightly less robust’ recovery in the eurozone in 2021 with growth of 6.1%.

Read our latest US investment insights from Alpha PM


Americans filed 1.3million new unemployment claims last week, down slightly on the previous week with nearly 18million receiving jobless benefits. At the end of June, the jobless rate had fallen from a peak of 14.7% in April to 11.1%.


China’s factory gate prices fell at a slower than expected rate in June.

Read our latest investment insights from Alpha PM


Brent oil remained around $42 ahead of the OPEC+ meeting this week where there are suggestions that producers may agree to ease production cuts.

Finally, if you’ve ever ridden on a roller coaster, you’ll know its impossible not to scream while on it. However, that is exactly what one Japanese theme park wants visitors to do in a bid to stop Covid-19 virus-carrying droplets from flying out of passenger’s mouths. Passengers can attempt to win a free day pass by adopting their most ‘serious face’ for the ride photo.


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