Chancellor’s emergency package has little impact on market

Rishi Sunak’s announcement to protect businesses has done little to reassure investors in a volatile market.

Article updated: 18 March 2020 11:00am Author: Joe Healey

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  • £350bn emergency business package announced last night seems to have limited impact on the markets
  • Future dictation on markets relies wholly on the spread of the virus rather than the immediate fiscal and monetary responses
  • There’s no certainty when or where future demand for the businesses such as travel and hospitality will come from
  • Current levels may just be providing a strong buying opportunity for investors willing to accept higher risk

The announcement of the £350bn emergency business package announced last night seems to have limited impact on the markets which is currently down roughly 4%. This reinforces our belief that the future dictation on markets relies wholly on the spread of the virus rather than the immediate fiscal and monetary responses. Monetary policy seems to have lost its effect, having limited impact on market direction. This is down to the fact that most Central Banks are now at extreme lows and have put all their eggs in one basket which has frightened investors further in the event of a recession.

It’s clear that fiscal policy is required which governments have seemed willing to provide, but this does not take away the fear for investors. Fiscal policy generally takes longer than monetary policy to feed through into the economy and despite the Government being willing to support businesses, there’s no certainty when or where future demand for the businesses such as travel and hospitality will come from.

I think what sums up how the next few weeks/months will look like, is the VIX index; the US fear gauge which recorded levels higher than what was seen during the 2008 financial crisis. However, with volatility does come opportunity and although investors will be tetchy over how much further markets have to fall, at current levels they may just be providing a strong buying opportunity for the investors willing to accept higher risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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