What does ‘Freedom Day’ mean for the UK market?

‘Freedom Day’ is finally upon us, where all but a few Covid restrictions have now been lifted. Nightclubs have reopened, social distancing rules have been abolished, and we can now host as many friends and family as we’d like in our houses and gardens. After months of decimating covid restrictions, many business owners have been dreaming of this day for a long time, with most of them believing that ‘Freedom Day’ is long overdue. 

Although this should be a cause for celebration up and down the country, there is still much anxiety and uncertainty regarding the next few months, especially looking towards autumn and winter. Cases driven by the Delta variant of the disease are rising at a record pace, with many in the scientific community warning of 100,000+ cases per day in the not-too-distant future. Although the vaccine rollout has widely been deemed successful, scientists too warn that there are not yet enough vaccinated individuals to eliminate the risk of the NHS being overwhelmed. Many believe that the plaster should be removed carefully, rather than suddenly ripped off. 

How are the markets reacting to ‘Freedom Day’?

The immediate reaction to ‘Freedom Day’ has been one of caution rather than confidence. As of mid-afternoon on Monday 19th July, the FTSE 100 had fallen by 2.7%, the largest fall since April. The largest fallers were ITV, Rolls-Royce, and IAG, although much of the overall fall has been attributed to travel and leisure, with the rising cases and lukewarm reception to ‘Freedom Day’ resulting in a less busy summer than had otherwise been predicted. The markets across the pond were similarly anxious, with Dow Jones opening down 1.45%, and S&P 500 down 1.3%.

While these figures do not necessarily make for optimism, after months of steady gains and relative calm, this was not wholly unexpected.

Looking ahead

If the last year has taught us anything, we know that nothing in the future is clear. Even the brightest virologists and epidemiologists across the globe cannot fully predict what will happen over the next few months. How the markets react will entirely depend on the severity of the virus spread now we have reopened, as well as the success of the vaccination programme. Despite the government’s confidence in lifting restrictions, there is also the unfortunate prospect of another lockdown if the spread of the virus does begin to get out of control. 

It’s not all doom and gloom, however. Now that restrictions are lifted, we are likely to see a massive influx of business to the hardest hit areas of the economy such as hospitality, leisure, and travel (the latter within the UK). If hospitalisations do, as many predict, remain manageable, then the economy is expected to boom throughout the summer and into the autumn. Although the ‘Pingdemic’ has made all the headlines recently, it’s likely that reforms will be put in place to strip back the need to self-isolate to ensure that hospitality, and other businesses, can function properly. 

Cave & Sons

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