Why high street retailers will fear second wave of coronavirus -Josh Pond

As the fabled John Snow from Game of Thrones famously said, “winter is coming”

Library image of a high street during the lockdown.

A fact that has not been lost on the UK Government who are preparing for a potential second wave of Covid-19 this winter.

This has included an additional £3bn in funding for the NHS, to help get it through the winter period, already a stretch without the threat of Covid.

Sign up to our Business newsletter

Sign up to our Business newsletter

Data produced by the academy of medical sciences, as requested by the UK’s chief scientific adviser, Sir Patrick Vallance, stresses there is still a high degree of uncertainty over how the coronavirus pandemic will play out this winter. However, coronaviruses tend to have a greater impact when temperatures fall so a second wave could be likely.

It is, of course, impossible for anyone to predict the direction events will take, but as the Government prepares it seems sensible that investors should do the same.

Some of the themes that played out in the first lockdown could help investors foresee what businesses may be able to weather the storm and those that would be severely or mortally wounded by a second lockdown.

Traditional high-street retailers who have already been hit hard by the first wave would be extremely vulnerable to any second lockdown. Specifically, those businesses with little to no online presence would find themselves devastated. This would be particularly true in the period leading up to Christmas, when a significant proportion of the year’s sales take place.

Both ASOS and Marks and Spencer suffered during the initial lockdown. It was ASOS, however, which recovered quickly as public spending shifted online. This shows that on the flipside, those retailers who are set up for online retail could weather the storm of a second lockdown or potentially benefit.

Gold is making headlines again as it continues to rise during record low interest rates and with central banks around the world carrying out unprecedented monetary stimulus.

It appears even without a second lockdown, the likelihood of more stimulus from central banks and government schemes in order to aid with the continued economic recovery will be needed. In this type of environment gold has many of the desired qualities an investor may look for, acting as a store of value against any sign of future inflation.

Indeed, the resulting stimulus from the first lockdown has boosted the value placed on the precious metal considerably. It is likely this trend would continue further and faster were we to see a second lockdown this winter.

Post Covid-19, it appears companies that show resilience and can withstand these kinds of shocks now have a greater value placed on them than pre-pandemic. Unilever is one example of a company that has shown itself to have these types of qualities that investors are now seeking.

Although many parts of its business were impacted during lockdown, some areas such as household cleaning products saw a significant uptick in sales. Many of Unilever’s food brands also flew off supermarket shelves as people spent more time eating at home.

It’s important to note that any single company can have any number of unknown factors that can affect its share price, which is why a diversified portfolio can be beneficial.

As active investors it is important to think about what events could unfold and therefore how a portfolio can be positioned best in order to protect on the downside and take advantage of any opportunities on the upside.

The themes highlighted above that we saw unfold during the start of 2020 could strengthen further if we were to see a repeat situation this winter.

Josh Pond is a Technical Investment Writer – Rowan Dartington

Editor’s note: first and foremost - and rarely have I written down these words with more sincerity - I hope this finds you well.

Almost certainly you are here because you value the quality and the integrity of the journalism produced by The Yorkshire Post’s journalists - almost all of which live alongside you in Yorkshire, spending the wages they earn with Yorkshire businesses - who last year took this title to the industry watchdog’s Most Trusted Newspaper in Britain accolade.

And that is why I must make an urgent request of you: as advertising revenue declines, your support becomes evermore crucial to the maintenance of the journalistic standards expected of The Yorkshire Post. If you can, safely, please buy a paper or take up a subscription. We want to continue to make you proud of Yorkshire’s National Newspaper but we are going to need your help.

Postal subscription copies can be ordered by calling 0330 4030066 or by emailing [email protected] Vouchers, to be exchanged at retail sales outlets - our newsagents need you, too - can be subscribed to by contacting subscriptions on 0330 1235950 or by visiting www.localsubsplus.co.uk where you should select The Yorkshire Post from the list of titles available.

If you want to help right now, download our tablet app from the App / Play Stores. Every contribution you make helps to provide this county with the best regional journalism in the country.

Sincerely. Thank you.

James Mitchinson

Editor