Speculations regarding FTSE 100 amidst the second lockdown
The second wave of the COVID – 19 Pandemic has already begun across almost all countries worldwide. As conjectured by the experts, this second wave of coronavirus will be more dreadful as compared to the first wave in all aspects, i.e., in terms of Health Index as well as Business Index of all countries. Health or Human Development Index is for sure a concern of any country, but at the same time, trade is also a worrisome area of concern.
In short, this second wave might put the overall global business of all countries in a much bigger pit of distress. All the major world financial indexes, such as NASDAQ (United States), FTSE Index (United Kingdom), Hang Seng Index (Hong Kong), Tokyo Stock Exchange (Japan), etc., have displayed this above-stated effect on the overall business of the respective countries. Out of these country indexes, let’s have an overview of the United Kingdom Stock Indices and market scenario.
As per the Analysts and experts, ever since the beginning of 2020, the United Kingdom (UK) Market has decreased approximately by 1172 points or approx. 15.50%, and to top it with this is the effect of a pandemic on the market. Now, even more with the start of this second wave, experts predict that the UK market and economy will see an economic contraction in November of approximately 5.7% to 6.2% in lieu of the new lockdown measures across the United Kingdom and going forward in December it will be followed by a marginal recovery of approx. 0.3% to 0.4%.
Furthermore, as an effect of it, UK economic growth is speculated to have negative growth at the end of the year between minus -2.25% and -3.50%. Thus, the annual GDP growth in 2020 will also be affected, leading towards negative GDP growth between minus -11.00% and -11.70% at the end of the year.
The UK economy is mainly diversified in size and type of business, i.e., there are many businesses in the UK market that earn income & most of their profit from overseas sales rather than domestic. However, there are also some UK high street retail businesses having competitors all over the world. It also means that the largest UK companies have been strategically trading on lower valuations of the stocks and products. At a market level, international investors are steering clear, which can create pockets of opportunity.
Also, further considering the declaration of the coronavirus vaccine’s rollout, it is speculated that the UK market’s GDP growth will range between 6.0% and 3.4% in 2021. Still, it will depend on the success of the COVID – 19 Vaccine’s rollout. Also, the UK market’s recovery growth in 2021 will depend on its ability to secure the trade deal with the European Union as the majority of the UK’s income is from overseas trade markets.
However, analyst and experts have also stated that if there are any more prolonged lockdown measures and apart from the speculated success of vaccine rollout effect on the UK market in 2021, the UK economic yield might return to its corona pre-crisis levels only probably by the third quarter of the year 2022. With complimentary speculative recovery speed, the UK economy might fully recover from this crisis despair only until the end of 2023.
Considering the current scenario and speculations mentioned above, it can be concluded that, even though the boost in UK’s economic activity is expected as the vaccine rollout will successfully progress only may be by the second quarter of the year 2021. However, the long term stance or outlook of the UK economy or market will very much depend on two factors, i.e., firstly, it will depend on the disposition and time extent of more new second wave restrictive measures; as well as secondly, it will depend on the consequences of the United Kingdom & European Union trade negotiations outcome. But the complete recovery might only be seen by the end of the year 2023.