Market Update – July 2020
Global equities pushed on further in June, rising by 1% on the month to finish one of the best quarters in the last 50 years (+15.3%), though still 7.2% lower year-to-date after the collapse of the first quarter. Continued positive news on reopening of economies, a larger than expected fiscal stimulus from Germany (4% of GDP), a significant increase in the ECB’s stimulus measures (an extra 600bln of quantitative easing and an extension of the term), rumours of a further fiscal package in the US (another $1tln) and a huge positive surprise in US job numbers combined to lead to a continuation of April and May’s surge in equity prices in early June, the US market briefly getting into positive territory on a year-to-date basis.
However, this coincided with two note-worthy events as both the odds of a democratic clean sweep in November and the number of coronavirus cases in US states bordering South America rose to unsettling levels. Further disappointment in regards to the potential for European banks paying dividends in the near term, continuous Brexit stalemate ahead of the month end deadline and a Fed meeting which couldn’t deliver anything new all contributed to a sudden change in sentiment, culminating in a large global sell off mid-month, after which equities struggled for direction as the continued reopening globally is met by a very concerning spike in Covid-19 cases (and hospitalisations) in the US and South America, no progress on Brexit talks and ongoing deterioration in the US-China relationship.