A 2021 market boom would be welcome, but there will still be plenty of losers | Stock markets

When the prime minister announced, in the last week of October, a second national lockdown in England, the best thing to do, it turns out, was to buy shares in pub companies, airlines, gyms, retailers and restaurant operators – in other words, those businesses that were about to get clobbered again.

No stock-picking skill was required. Everything has gone up. Here’s a sample of representative names: JD Wetherspoon up 37%; easyJet 88%; the Gym Group 64%; Marks & Spencer 60%; and Restaurant Group, owner of Wagamama, 83%.

The explanation is well known, of course. Ten days later Pfizer and BioNTech announced that their coronavirus vaccine had been stunningly successful in trials. Moderna followed a week later, and then AstraZeneca and Oxford University. The stock market looks ahead and it’s not hard to see that a vaccinated world will improve the fortunes of beaten-down sectors.

How much improvement, and how quickly? Answers are impossible, but stock market investors are clearly betting on normal life being restored at speed, at least at the level of individual companies. There’s even some talk of some “Roaring Twenties” years as consumers come out of hibernation.

Stock markets are prone to wild swings – and one should note that easyJet’s and Wetherspoon’s share prices, for example, are still about a third lower than they were on 1 January. But amid the din of conflicting signals, the rapid rebound thesis can’t be entirely dismissed. It could happen. Look at last week’s events in the retail industry. On one hand, the spectacular failures of Arcadia and Debenhams threaten 25,000 jobs. On the other, shoppers queued for hours to get into Primark stores and the big supermarket chains said trading had been excellent in recent weeks (one reason why they’re now returning their business rates relief). There is demand and cash out there.

Add vaccines into the mix and it’s possible to imagine a mini-boom. There may still be 2.6 million unemployed in mid-2021 – as Rishi Sunak, the chancellor, warned in his spending review last month – but those who kept their jobs will be feeling financially safer than they have done in ages.

Their debts will probably be lower because they didn’t have a summer holiday and lockdown was a frugal experience. House prices have not collapsed and interest rates look likely to stay low. Why not spend? You can see why share prices in consumer-facing companies are reacting.

Of course, the plot could turn out differently. Vaccine rollout could be slower and more difficult than assumed. We don’t know if preventative vaccines will also slow the transmission of Covid-19. No one knows when we can stop talking about tiers, masks and social distancing. And, sooner or later, Sunak will be back with tax rises – the UK, after all, will borrow £394bn this financial year. But the possibility of a very good 2021 for stock markets is clearly alive. That is a significant change in the investment outlook. Here, though, is the point to remember: the stock market is not the real economy. Rather, it is a collection of mostly larger and stronger companies – those whose relative competitive advantages may have been reinforced during the pandemic.

If the real economy does produce 2.6 million unemployed – or anything close to that number – that’s the true story of the pandemic. The losers in the jobs market are disproportionately younger workers without the pension savings that benefit from a rising stock market.

So enjoy the recovery that investors are anticipating. But, beneath the surface, the UK’s deep economic challenge of inequality has become more entrenched. Higher share prices are good news, but they are not the whole picture.

Decarbonising is just hot air if cuts drive us away from rail

With all the billions Rishi Sunak has dispensed from Treasury coffers this year, it might seem churlish to make a fuss about the £1bn he quietly clung to in the spending review. Rail’s infrastructure budget until 2024 is not £10.4bn, as had been set, but £9.4bn, ministers have confirmed.

Far more of course has been needed just to keep trains running during the pandemic, with an additional £8bn to cover the shortfall in passenger revenue, and train operator franchises replaced with new emergency contracts.

Nonetheless, the reduction has set alarm bells ringing. For all the talk of record investment, Network Rail’s 2019-24 budget did not come with the to-do list that accompanied previous five-year plans. After trouble with electrification of the Great Western mainline – and faced with more rigorous financial accountability – the government declined to promise anything specific. Even the one expected major intervention, the TransPennine upgrade, has yet to be nailed down.

Instead, rail investment appears increasingly polarised – between the £100bn for the separate HS2 juggernaut and a few small but crowd-pleasing grants to reverse Beeching cuts to branch lines. The industry, which has long been asking for clarity about what is in the pipeline for the existing railway, has been further perplexed by the covert cuts.

For ministers to lump together road and rail infrastructure spending and call it record strategic investment is at best a ruse and at worst an end to differentiating the two. It has been proved that £27bn in roadbuilding will only generate more motor traffic. To prove that its buzzwords – decarbonising, levelling up and building back better – are more than empty words, the government must cut the money from tarmac first.

Gaming industry may now see odds stacked against it

The day of reckoning for the gaming industry is finally upon us. A long-awaited government review of gambling law kicks off this week with the publication of its terms of reference illustrating exactly what will be on the table.

As the Guardian revealed last week, its scope is expected to be vast, with ministers looking at strict new curbs on everything from football sponsorship to online casino spending. The result could be a significant unwinding of the Gambling Act 2005, the Blair-era legislation that unshackled the industry, on the premise that it was just another form of entertainment, albeit with a slightly murky side.

The result of that legislation has been that the British gambling sector has thrived and is even now pouring into the newly liberalised US market, leaving local competitors for dead. But if UK firms get clobbered meanwhile by draconian rules in their domestic market, parts of the industry will have only themselves to blame.

The debacle over fixed-odds betting terminals (FOBTs) showed how companies became hooked on the machines, just like so many of their customers – except with the crucial difference that they were winning.

Most bookmaking firms hotly denied that FOBTs were a problem – even in the face of strong evidence to the contrary – and gawped in dismay as the machines were regulated out of existence.

MPs are now taking aim at other exploitative practices, such as “VIP” schemes that target serial losers and online casino products that are little more than digital FOBTs.

Many are also fed up with the industry’s quasi-parasitic attachment to football, which it uses to prise open the wallets of young, mainly male, punters.

Even within the gambling world, many old-timers concede that, far from being the victims of moral panic, their greedier peers have put the whole industry in peril.

Now we’ll find out whether the house really does always win.

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