There is no question the UK economy is in dire straits. A fall of 12% in GDP in Q2, followed by a 16% rise, led to an economy 7% smaller in September. The recent imposition of a second lockdown will lead to a further decline. The Bank of England forecasts the UK economy will end the year 11% smaller than when it started. The OBR estimates it will be smaller than it was entering the current crisis until late 2022. One lagging indicator which is lagging even more than normal is the unemployment rate. Thanks to the furlough scheme, the scale of job destruction we have seen has not yet registered in the data. This will likely have a huge effect upon house prices, retail sales, consumer credit and other economic factors which will have knock-on effects for growth down the line. As for the current state of affairs, last week the Office for National Statistics (ONS) published its ‘Business insights and impacts on the UK’ report for November. Almost 17% of businesses are not currently trading thanks to coronavirus restrictions, while 50% of those that are trading have seen decreased turnover from the same period last year. Only 9% have seen turnover rise year on year. Looking forward, 14% of those businesses still trading have no or low confidence in their ability to survive the next three months. A further 7% were not sure how confident they were. It is clear that the effect of the pandemic and the lockdowns has yet to be fully felt in the real economy. However, this does not mean that an investment in the UK stock market will necessarily do poorly. Stock markets tend to anticipate and price in expected events in the future. A look back at the last global crisis illustrates this well. The below graph shows the UK unemployment rate and the FTSE All-Share performance from the start of 2007 until the end of 2013. The index doubled between 09 March 2009 and 31 December 2013, with most of the returns coming while the unemployment rate was still rising.