When the COVID started to show cases around the world, governments in the name of public health told everyone who could to stay home. This action helps, but it did have economic significance to what we all considered normal. One of the affects was cars were parked and few people traveled or why buy a new or used vehicle? The result was auto sales declined drastically, however for every country which has auto plants, they are a large driver of the economy, in terms of jobs and goods sold.
In England, in an article by Paul Waldie of the Globe and Mail, the auto industry has seen 6,000 jobs disappear. Experts are warning it could take 5 years to recover.
Sales ground to a halt in April and have modest improvements since then. Vehicle sales for the year are expected to be 920,000 units which is a 1/3 less than the previous year. It is possible the number will be less if Britain and the European Community do not agree on tariffs. If no tariffs go higher or prices go higher in the EU. The issue is 81% of the autos in England are exported and more than half go to the EU. The domestic market of the UK is not that big.
In addition, Prime Minister Boris Johnson is coming under increasing pressure to help the auto industry as Germany and France has helped their companies, the companies gave billions in aid.
Linking to dividend paying stocks, institutionally we all have an idea of what is normal and to change the economy to the new normal takes immense change. Will governments go for the new normal or try to go back to the old normal. President Trump wishes to go back to the old normal, but COVID has jumped in the US. There are more unknowns that normal, but what we were all hoping for a short period of time for the shutdown looks longer and longer as the weeks go by. Hopefully you have made changes to your investment portfolio to include the COVID stocks which benefit from a shutdown as you watch the old normal stocks which were profitable try to come back. The good news is everyone suffered the same, those who had dividend shares suffered a little less.
There are more questions than answers, till the next time – to raising questions.