Tuesday 19 January 2021 10:46 am

Market confidence is only artificially low, says IW Capital CEO

The impact of Covid has been continually unpredictable since the first ripples in January of last year to the third lockdown of this year. Despite this, there is plenty of reason to feel optimistic about 2021.

Both historical evidence and current sentiment point to a period of boom after months of gloom, according to Luke Davis, CEO of Mayfair-based investment firm IW Capital.

“The past few months have been a huge shock to every sector of our economy and lives, but this won’t last forever, and I do feel that we now have a long period of growth to look forward to,” Davis told City A.M. earlier today.

Firstly, previous economic cycles have shown that after a period of economic downturn, growth soon returns. From its low after the 2008 crash to its high before Covid, the FTSE 100 rose by over 3,500 points.

Read more: FTSE 100 opens higher as markets await Yellen grilling

From its low after the early 2000’s dot com crash to its peak in 2008, it rose nearly 3000 points, Davis argued.

“Looking back into history there is a trend of these kind of events giving way to growth every ten years or so. This crisis is unlike any other since the Spanish Flu and economic downturn of 1920-21 – which lead to what we now call the roaring twenties,” he said.

Boom after gloom

In fact, the UK has seen an economic downturn or major event roughly every ten years in the recent past since the period of sustained post-war growth came to an end, and Coronavirus looks to have gotten the 20’s event “out of the way early” as optimism rises.

Stock markets around the world are approaching record highs and even in the UK – amidst a third lockdown – recruiters are working hard to keep up with the demand for new hires as business confidence returns, Davis continued.

Read more: Exclusive: City fund managers on the winners and losers from the Brexit deal

The fact that this downturn is so unlike any other actually bodes well for economic growth. Confidence is low only artificially and will jump once the vaccine programme has progressed to a point where restrictions can be lifted,” he said.

“People want to get out and spend, businesses want to grow and investors want to help them do that, it’s a perfect storm for rapid growth,” Davis noted.

Hospitality

He is convinced that pubs will bounce back along with restaurants and other hospitality.

“No one will want to stay at home after the year we’ve had and I really believe that. Working with local residents on redeveloping the pub and hospitality venue Rockwater Hove has shown me how much people want, more than ever, a place to come together as a community,” he said, concluding that “we are not out of the woods yet, but the sun will almost certainly be shining when we are.”

Read more: Pubs left in the dark again as government fails to deliver thousands of lifeline grants

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