We hope you are staying safe and healthy through these unusual times. Here’s your next weekly update from Calculis, sharing the good, the bad and the more light-hearted news.

What’s happening?

The good

Both Matt Hancock and Dominic Raab have confirmed this week that the UK has hit the peak of the virus, announcing that social distancing measures were working and making a difference.

It was also announced that up to 10 million key workers and their households can now book a coronavirus test online or through their employer. This includes NHS and social care workers, police officers, teachers, those in the justice system, supermarket and food production workers, journalists and transport workers.

The bad

US oil prices turned negative for the first time in history

Due to global lockdown measures, the demand for crude oil has dramatically decreased, but the supply is still strong. This imbalance saw the price of a barrel of oil drop from around $60 at the start of the year to around $20 last week.

The recent sharp fall into negative territory was not because the situation had deteriorated further, but because crude oil is usually traded in contracts – and one expired this week.

Oil is mostly traded on futures contracts, which means that traders agree to take a certain number of barrels on a certain date, at a certain location. They usually never actually receive these barrels due to storage. Instead they roll the contract over onto a new one.

The 21st April is the last day for holders of the ‘May WTI futures contract’ to sell this contract so that they do not have to ‘receive’ the physical oil during the month of May. Cushing, a place in Oklahoma where oil is stored, will be full, which means that holders of the May contract were basically willing to pay to get out of their contracts.

What happens next?

We don’t see negative oil prices as a new normal going forward.  From Tuesday this week, oil traders begun trading barrels for delivery in June, which are expected to achieve higher prices. A meaningful recovery of oil market prices will depend on how quickly demand increases. A speedy end to lockdown would accelerate a market price recovery, but a slow emergence from the Covid-19 crisis could mean further financial pain for oil producers until 2021.

An interesting read…

Six biases you should know about but were too afraid to ask

We recently came across a really interesting article in Citywire which explores the different behavioural biases that impact how we process information and how we emotionally react to the current global climate. Here’s a quick summary:

1. Confirmation bias – cherry-pick information that confirms our existing beliefs or ideas 

Fake news can spread rapidly, causing panic and confusion. During uncertain times, those with a higher than typical confirmation bias will be much more susceptible to news and social media posts that do nothing but confirm their current fears and anxieties.

2. Framing – deciding something based on the way information is presented, as opposed to the facts

It’s not what you say, it’s how you say it! Those with a strong framing bias will be easier to mislead and will tend to accept news headlines just as they appear.

3. Loss aversion – prefer avoiding losses rather than achieving similar gains

People who are especially loss averse are more likely to feel the impact of a fall in the stock market and make changes so that they ‘feel’ better.

4. Probability neglect – disregard probability when planning under uncertainty 

Uncertainty is stressful for everyone, but those with strong probability neglect will be absorbing the current situation and reacting based on emotionally-led opinions. The positive will likely be dismissed for the negative.

5. Action bias – act in order to feel good and take control of a situation

A natural instinct during market volatility is to take decisive action (better to do something than nothing) instead of riding out the storm. It’s important to protect your portfolio from your action bias by trying to be patient.

6. Negative bias – negative events have a greater impact on our brains than positive ones

We tend to give more weight in our minds to things that go wrong than to things that go right. During this time of uncertainty, it is important to take time to reflect on the positives too.

It’s not all doom and gloom…

Here are some other stories which show a different side to these unprecedented times.

Star-studded teachers
To assist parents resuming homeschooling after the Easter holidays, the BBC has enlisted some famous experts to deliver online courses to young people. BBC Bitesize will feature geography lessons (specifically on animals and oceans) from Sir David Attenborough and Professor Brian Cox will teach science. Read more

Netflix gets 16 million new
Netflix has seen subscriber numbers surge this year, as lockdowns around the world keep people at home. Almost 16 million people created accounts in the first three months of the year to keep them entertained, the firm said. Read more

Romsey Town Football Club to host celebration day for NHS workers battling coronavirus
A Romsey football club committee has revealed they plan to host a celebration day for NHS workers on the frontline battling coronavirus. Organisers at Romsey Town Football Club, Bypass Ground, announced yesterday football fans could be given free entry to their first game of the season, due to kick off in August. Read more

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