Market Update

Global equity markets, except for Hong Kong and China, experienced a robust rise over the week, rebounding from previous losses and emphasizing the value of a long-term investment approach. While the week brought various economic data and news, the main focus of equity markets remains on the economic repercussions of the coronavirus. Despite a sharp rise in US unemployment, there's little evidence so far that households are facing solvency issues. History, such as the 2008/2009 global financial crisis, shows that governments and major central banks had to implement multiple stimulus packages before confidence began to return. It's highly likely that more stimulus measures will follow, especially with the upcoming US Presidential elections in November.
Dr. Anthony Fauci, a prominent infectious disease expert in the US, expressed support for reopening the economy and optimism about Moderna's potential vaccine, indicating that a vaccine could expedite the global economic recovery.
In the upcoming week, the focus will be on the weekly US jobless claims, particularly the continuing claims data, providing clues about re-employment for laid-off workers. Other important US data releases include the Chicago Fed national activity index, new home sales, the Fed’s Beige Book, and the Fed’s preferred inflation measure, the PCE. Additionally, Eurozone CPI, Chinese PMI, and Japanese retail sales will be closely watched.
Despite escalating geopolitical tensions, equity markets opened higher, with the FTSE-100 up approximately 90 points (1.50%). Donald Trump's tough stance on China has raised concerns, prompting China to warn of a potential "new Cold War." However, Trump's approach aligns with the sentiments of many American voters frustrated about Chinese trade and the ongoing coronavirus crisis. It is crucial to shift the focus towards the economic recovery as more countries, including Japan, start reopening their economies due to declining infection rates and deaths. Travel and retail companies are among the best performing equities, benefitting from global stimulus measures and economic reopenings. While geopolitical risks and the potential for a second wave of infections are acknowledged, the current level of bombastic rhetoric is not sufficient to dampen enthusiasm surrounding economic reopenings and potential vaccine developments. However, a cautious stance is maintained, with slightly higher than normal levels of cash (including liquidity funds) to prioritize risk management and capital preservation.