Covid: Can’t live with it, can’t live without it

Sponsored Content By Susie Jackson, head of offshore investment management at Kleinwort Hambros


Susie Jackson is the head of offshore investment management and leads the teams of Jersey, Guernsey and Gibraltar. At Kleinwort Hambros, our teams provide investment services covering discretionary portfolio management, investment advisory and execution only.

Kleinwort Hambros has offices across the UK mainland as well as offshore in Guernsey, Jersey and Gibraltar. We have experienced investment professionals, client relationship personnel and dedicated support teams. We are confident and proud of our ability to offer a first-class, modern, full-service wealth management experience that is adapted to the needs of a wide range of client situations.

DURING the summer, Delta’s dominance and issues with getting people vaccinated generated uncertainties over how long the economic recovery which started earlier in the year could last. Indeed, going into autumn, there is little doubt that the public-health crisis will be around for a while and continued economic activity may well hinge on how citizens and policymakers decide to ‘live with Covid’.

The IMF has confirmed its growth forecasts for the global economy (+6.0% in 2021 and +4.9% in 2022), with advanced economies seeing upward revisions, supported by a recovery in consumption, especially of services. The headline figure, however, belies substantial regional disparity. In countries where vaccinations are reaching relatively high rates – such as the United States, the UK and much of Europe – social-distancing rules that had been hampering activity have been significantly relaxed and commutes, school runs and holidays abroad have all resurfaced. Even as Covid stays virulent and pervasive, a ‘new normal’ is taking root.

However, it is not brighter everywhere. Some advanced countries remain behind the curve given lower vaccination rates and strict public restriction, such as Japan and Australia, where ‘Zero Covid’ policies remain in force. New Zealand has had to reimpose sanctions, a useful reminder against complacency. The outlook for emerging markets and developing economies has been scaled back for 2021. Emerging economies will broadly suffer from reduced access to the vaccines as well as less support from fiscal and monetary policies.

China, as often is the case, is a special category of its own. The country is facing a deceleration in growth because of weakness in both external demand (slowdown in exports) and domestic demand (decline in consumption due to lockdowns). Compounding this is a regulatory crackdown on domestic technology companies, especially the Golden Dragons (US-listed Chinese companies). This partly explains why Chinese equities have had a rollercoaster ride this year, spilling over to emerging market assets at large. While a recovery appears under way from deeply oversold conditions, the consequences for investment in China over the long term remains a matter of intense debate. We continue to hold a position in emerging-market equities in many strategies, with the investment case underpinned primarily by attractive valuations. We accept those valuations also come with higher volatility, but for their continued inclusion they must also be justified by an expectation of commensurate return.

Undoubtedly, the public-health crisis also continues to cause difficulties for some sectors and production chains. These difficulties are putting pressure on the costs of inputs, which may threaten business margins. Nonetheless, the majority of these recent price pressures reflect temporary factors and we expect inflation to return to trend next year. Our belief is underpinned by the fact that labour markets still exhibit significant slack, particularly when viewed through the lens of labour-force participation rates which are well below pre-pandemic levels. Sidelined workers will probably seek work again as income support schemes and school closures end. Moreover, margins for S&P 500 companies in aggregate are at a record-high 14.1% (Q2), indicative that most are managing cost pressures with ease, even if the rhetoric from the chief executives may indicate otherwise.

As economies continue to heal and redefine a new paradigm of how to manage ‘living with Covid’, central banks – led by the US Federal Reserve – will maintain an accommodating stance, even if they do begin to taper their sovereign bond purchases. The European Central Bank has been the first to do so, announcing on 9 September a reduction in asset purchases via its Pandemic Emergency Purchase Program. However, at this stage, the reduction is more symbolic than substantive, with the ECB committing to continue pumping tens of billions of euros of liquidity into market each month. That will be the case for others too as we see out this year.

Past performance should not be seen as an indication of future performance. Investments may be subject to market fluctuations and the price and value of investments and the income derived from them can go down as well as up. Your capital may be at risk and you may not get back the amount you invest. Changes in inflation, interest rates and the rate of exchange may have an adverse effect on the value, price and income of investments.

We offer restricted advice, which will be based on a limited analysis of different types of products which include (but are not limited to) financial instruments or products linked to entities in the Societe Generale Group. We will advise and make a recommendation for you after we have assessed your needs. Please speak to your private banker for details of the range of products on which we provide advice.

SG Kleinwort Hambros Bank (CI) Limited is regulated by the Jersey Financial Services Commission for banking, investment, funds services and money services business. The company is also authorised and regulated by the UK Financial Conduct Authority in respect of UK regulated mortgage business. The firm reference number is 310344. The company is incorporated in Jersey under number 2693 and its registered address is PO Box 78, SG Hambros House, 18 Esplanade, St Helier, Jersey JE4 8PR. This document has not been authorised or reviewed by the JFSC or FCA.

SG Kleinwort Hambros Bank (CI) Limited is a participant in the Jersey Bank Depositors Compensation Scheme. The JBDC Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any five-year period. Full details of the JBDC Scheme and banking groups covered are available at or on request.

Please note Jersey is not part of the UK and when you conduct business with SG Kleinwort Hambros Bank (CI) Limited you will not be eligible for: (a) the protections provided under the UK's Financial Services and Markets Act 2000 other than protections relating specifically to UK regulated mortgage business; or (b) referring complaints to the UK’s Financial Ombudsman Service. However SG Kleinwort Hambros Bank (CI) Limited’s UK regulated mortgage business is covered under the UK's Financial Services Compensation Scheme. You may be entitled to compensation from the FSCS if SG Kleinwort Hambros Bank (CI) Limited cannot meet its obligations in relation to UK regulated mortgage business. This depends on the circumstances of the claim. For further information about the FSCS (including the amounts covered and eligibility to claim) please contact your Private Banker or refer to

In accordance with the applicable regulation, we inform the reader that this material is qualified as a marketing document. CA25/H1/21

Unless otherwise specified, all figures in this report were taken from the following sources on 06/09/2021: Bloomberg and Datastream.

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