Notwithstanding the sharp increases in global raw material prices seen this year, UK inflation still seems to be missing in action. Year-on-year, CPI fell from 0.7% in January to 0.4% in February. The combination of seasonally slow post-Christmas sales activity and a full month of lockdown forced down the prices of food, clothing and footwear by sufficiently more than to offset any pressures elsewhere in the opposite direction.


In a busy week for UK data, piecing together the jobs jigsaw reveals a generally improving picture. Headline unemployment for the three months to January remained steady at 5%, around 1.7 million people registered as out of work; in context the rate was 3.8% in late 2019. However, 4 million people are not working but are still being paid via the furlough scheme (because the scheme reimburses the employer, technically these people still rank as ‘employed’), though this is significantly below the peak of 8.9 million in May of last year, and the number will almost certainly shrink again as the hospitality sector in particular is allowed to resume activity in staggered stages during this spring.


It remains to be seen how many of those still on furlough will have no job to which to return, but clearly a significant number who have benefited from the protection of the scheme have been able successfully to go back to their old jobs. Encouraging news from HMRC shows that for the third consecutive month, the number of employees in the PAYE system increased again, this time by 68,000 in February; the number is still 693,000 less than a year ago but the trend is in the right direction. Further positive corroborative evidence is that while there remained 680,000 unfilled job vacancies in the three months to February, average wages (including bonuses) for those in employment rose by 4.8% over the same period, the fastest rate of growth since 2008, according to Trading Economics, and a multiple of the consumer prices inflation rate, indicating substantial real wage growth.


Thus overall, despite still being in this surreal situation of restricted freedoms, there is nevertheless demonstrable resilience in the UK economy. Despite the calamitous experience of a 9.9% decline in economic activity in 2020, and although there have been undoubted casualties along the way particularly on the high street (more store and branch closures with job losses announced this week from John Lewis and Santander), travel and tourism, the government’s “extend and pretend” lifeboat schemes have nevertheless appeared to shield the bulk of the workforce from the teeth of the economic hurricane. Of course, the real national financial cost is still there: it sits brooding on the government balance sheet in the form of £2 trillion of debt, some 110% of the size of the economy, to be dealt with at a later date.

Europe: when you’re in a hole, stop digging.

Looking across the Channel, the EU is only 22 miles away, but it might as well be living in a parallel universe. Its reaction to its self-inflicted vaccine debacle, as we wrote last week, a healthcare, political and public relations disaster, nevertheless becomes more bizarre and extreme by the day.


The root cause of the EU’s adoption of so-called ‘vaccine nationalism’ is simple: a small number of vaccines have been approved; there is literally global demand; there is limited supply; with little inclination to form an orderly queue, it’s either commercial canniness or sharp elbows to the fore.


While the argument has shone a torch on 21st century drug manufacture as a highly complex and international affair with many compounds of the overall pharmaceutical formula often being made in different geographic locations before final synthesis in to the tablets, capsules, liquids or salves that we ingest, jab or smear, one thing is abundantly clear: neither the EU, nor the UK, nor Belgium, nor Germany, nor India nor any other country or bloc manufactures these compounds or the finished drugs itself unless it has a nationalised pharma company to do it.


When such as Ursula von der Leyen (President of the Commission) or Charles Michel (President of the Council) declare proprietorially that “the EU has exported” so many vaccines as if the EU were a commercial entity holding legal title over the inventory, not only is it disingenuous but absolutely wrong. The EU itself has exported nothing. Pfizer and AstraZeneca, publicly listed but non-state-owned companies with global operations which include EU locations, have exported the vaccines for which they are being paid on commercial contracts (and certainly AstraZeneca is supplying all Covid vaccines at cost) such as those negotiated quickly and effectively in the UK by Kate Bingham and her team. If there are subsequent shortcomings in any such contracts, then that is a dispute between the customer and its supplier and if they cannot be reconciled, normal legal recourse is available. But Brussels’ representation is effectively a state of mind that the EU has a proprietary title to the disputed vaccines. In adopting such a position for political leverage, barging those who it sees as ‘ahead of the game’ out of the way and giving itself powers to block future vaccine exports in favour of its own needs, the EU is in danger of completely undermining the foundations not only of commercial counterparty law but the very roots of free-market capitalism.


In light of what began as a local spat with the UK government, involving the short-but-significant closure of the Irish border, but which has now developed into a major international diplomatic row embracing not only the UK but countries as far afield as India and Australia, many companies in politically sensitive sectors might be thinking twice about investing in the EU, or having ‘Brussels’ as a customer, if the risk is an unfair joust fought very publicly with the Commission which seems to think it can move the goalposts at will to suit its own political agenda (or in this case, to deflect criticism of its own very obvious shortcomings as the instigator of a botched vaccination programme).


The irony will no doubt be lost on the Brussels autocracy that in invoking trade protection, the EU has so far singularly failed to protect the single most important element which underpins its very existence: its people. However, as revealed in the two recent German state elections, it tends not to be lost on those trooping through the polling booths. Time will tell what are the potential knock-on effects on the investment outlook. The Jupiter Merlin portfolios have relatively little exposure to Europe.


The Jupiter Merlin Portfolios are long-term investments; they are certainly not immune from market volatility, but they are expected to be less volatile over time, commensurate with the risk tolerance of each.  With liquidity uppermost in our mind, we seek to invest in funds run by experienced managers with a blend of styles but who share our core philosophy of trying to capture good performance in buoyant markets while minimising as far as possible the risk of losses in more challenging conditions.


Please note

Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.  The views expressed are those of the individuals mentioned at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change.  This is particularly true during periods of rapidly changing market circumstances.

Fund specific risks

The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.

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