As we emerge from the latest lockdown, my favourite phrase is “revenge spending” which seems to be an important aspect of the short-term recovery story. Unlike other recessions those who kept their jobs did not spend, and therefore many countries including the UK and the US are seeing record levels of savings. The US is also benefiting from “helicopter money” with eligible households receiving $1,400 per head.

Many people just want to spend the money they accumulated, whether it is on a big-ticket item like a car, going on holiday or just going out for a meal or drink and all of this will help drive the economic recovery. This desire to spend post lockdown has coined the phrase “revenge spending”.

There is of course a counter argument to this in that those who have tended to save more are higher earners and retirees, and there is a consensus that not all this money will be spent. However, even a proportion of this amassed cash will make a big difference to economies.

As the UK leads the way on the vaccination programme, I listened to a fascinating podcast on how the UK did it, via sector expertise to order vaccines and test logistics before it was rolled out. Sometimes turning to the private sector can work.

Another podcast I enjoyed was ‘who killed Blockbuster?’ (not the legendary student-packed quiz show with the lovely Bob Holness) which discussed the iconic video rental service being the author of its own demise. I listen to many people talking about how Tesla is the only EV in town, and how the incumbent car manufacturers are starting to disappear. If Blockbuster had the funds to re-invent itself and continue along that path, Netflix might not be the behemoth it is today. They both had similar business models, the difference being Netflix adapted to changing themes and had cashflow to do so, (no overheads on premises to store their selections) and created its own content as well as leading the way in streaming existing catalogues of film and TV. It did not look this way at the beginning, but soon enough, poor Blockbuster was left on the shelf like some old popcorn.

The main point is that although incumbents like Blockbuster can be the author of their own demise, they can also re-invent themselves (worth looking at the story of Dell), and therefore we shouldn’t necessarily write off the incumbent car manufacturers yet.

Below we share some thoughts from different investment managers considering where we are today, and what to look for moving forward.

Invesco Economic Update

  • We have not beaten the virus; cases are rising in places across Europe and Emerging Markets including India, Brazil, and Turkey. The return to normality is some way off with some expecting developed markets to take at least a year
  • During the last 12 months household consumption in the UK has dropped by around 10%, and this has driven up savings levels to around £145 billion of excess cash. Most of this has been saved by high- and middle-income individuals and retirees. It is estimated that about 13% of this will be spent although lower levels that this could stall the recovery
  • There has been a rotation to the value sector with energy and financials being winners this year. They expect this to continue for a while
  • There has been debate about a commodity super cycle (see note from Vontobel), they believe that the drive to a low carbon world will drive demand in some areas like cobalt, lithium and nickel but this will take years and therefore they do not believe a commodity super cycle is on the cards

Vontobel – considering remedies, recovery, and reflation

This primarily focused on commodities as the global economy recovers:

  • Commodities are undervalued, and the US Fed aims to weaken the dollar which normally supports commodity returns
  • Investors are looking for alternatives to bonds and commodities are an important part of the diversification story
  • Commodity prices are driven by supply and demand:
    • Demand for commodities is increasing across Asia and China
    • Oil demand collapsed in 2020 but as global flight activity increases then expect oil prices to go up to around $75 a barrel
    • There are then commodities driven by ESG transition – as an example the supply of copper is falling just as the demand is increasing
    • Another area is soya beans where inventories are tight and therefore expect prices to rise
  • In summary, they believe that as the global recovery takes shape, there will be greater demand for commodities and limited supply driving a cyclical bull market

Templeton – anatomy of a recession

  • Believe US Growth to be around 7% this year
  • They expect herd immunity in the US in the second quarter; all the indicators on job sentiment, jobless claims, and truck shipments are positive
  • The levels of savings in the US do not include the latest $1,400 ‘helicopter payments’ and therefore expecting double digit retail sales growth
  • Unemployment is coming down faster than expected and they expect US job market to recover quickly especially in COVID sensitive areas
  • Potential concern is a rising yield curve, but rising rates are not necessarily bad for equities
  • Expect a temporary scare in inflation but they believe this will remain under control especially wage growth being controlled by automation and competition on prices

First Trust – economic update

  • US is slowly returning to normal; they estimate with vaccines and those who had COVID the US population is at 70% immunity ‘of sorts’, and therefore close to herd immunity
  • The US saw 40,000 people at a Texas Rangers Game and in states like Texas and Florida it feels very normal. There are some spikes, but these are expected as people come out of lockdown
  • As the US comes to herd immunity, they believe there will be a boom in the US, and this will be mirrored around the world
  • Concerns long term over the printing of money and increase in money supply to the US. This will lead to inflation and they expect this to settle around 3%-4% per annum. However, this could go higher if the Fed gets its policies wrong
  • They do expect interest rates to rise along with inflation, but it is not necessarily bad for tech, people will still buy an Apple product, Microsoft will take subscriptions etc
  • They see a rotation to service sector stocks who will do well from the opening up, but they do think tech will necessarily give up its gains

Hermes – Economic Update

  • Think this is more of a 2009 scenario which favoured EM and smaller companies; areas to focus on are vaccinations, extension of stimulus, higher than expected quarter end data in terms of growth and inflation
  • Global recovery will proceed at different speeds, expect a V shape recovery in the US but a W shape in Japan, Europe, and the UK
  • Concerned about deflation, although unlikely it is yet to be proven and areas like automation, globalisation and demographics are deflationary
  • QE in 2009 was supposed to support asset prices and place money into the economy. However, it created an inequality gap. In 2020 massive amounts were saved but by higher and middle earners and retirees, extending that inequality further
  • There is a correlation between fiscal/monetary policies and asset process, this is working for now and there is support for risk assets whilst this economic scaffolding is in place. The concern is a 1994 scenario where the Fed are behind the curve in terms of when they act and this causes a significant drop in equity prices, but they think this is some way off
  • The Euro crisis of 2011 was driven by the divergence between the worst and best economies. This time around the divergence is narrow between the worst (Ireland) and best (Greece), and this indicates that QE is working, which could be positive for the recovery in Europe 

JPM – Market Watch

  • Suez Canal is important; there is already a global shortage as companies reduced stock capacities. The bottleneck in the Suez Canal has not helped in moving goods around the world and as demand increases and supply cannot match, inflation will rise in the short term
  • Computer chips are the new soya beans, demand far outstrips supply, and this creates inflationary pressures
  • The markets are not worried about higher taxes in the US because people are spending, and there are excess savings. They expect more people to holiday in the US and therefore for money to stay in the country
  • The US imports about 22% from Europe and about 33% from Asia including China which will help drive the global recovery
  • Worry what happens when the Fed starts to unwind all the QE and think that will not be good, but they think as the US comes down from the recovery other parts of the world will pick up and so the global recovery will continue for some time

Other thoughts


  • Expect this cycle to be shorter than what we have seen in the past
  • Short term low interest rates, low real yields, climate changes policies are all positive for equities
  • Longer term worried about the Fed sticking to average inflation targets, and how any changes in policy will be negative for markets

The Conversation

  • Although we were “all in this together”, the reality is that COVID has increased inequality in society
  • Globally things to watch for example include Finland looking to eradicate homelessness by 2027, universal income as an experiment, the uptake on online schooling and then closer to home the impact on the younger generation and whether there is a change in how we view social care


  • Growth as a style has outperformed value by 125% in the last decade, but 77% of that came from the last five years and 45% in the last two years
  • But the value / growth argument is perhaps a red herring, the pandemic has enabled others to play catch up. Other businesses have learned how to do e-commerce so that Amazon is no longer the only shop in town, and with EVs the likes of VW, Hyundai and GM are showing they can adapt and be profitable

Articles of interest

How a radical interpretation of the Great Depression became the orthodoxy behind solving the COVID economic crisis

Will the Bank of England’s reliance on quantitative easing work for the UK economy?

Bill Hwang Had $20 Billion, Then Lost It All in Two Days

New Details About Biden’s $2 Trillion Tax Plan Unveiled—Here’s What We Learned

COVID-19 lays bare social inequality says UN chief, as COVAX doses top 36 million

Note: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog, and the reader should accept that by its very nature many of the points are subjective and opinions of the author. Individuals wishing to buy any product or service because of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.