Week ending 29th May 2020.

World Market at a Glance

As you can see from the accompanying table, global equity markets ended the week (and the month) higher as markets finally appear to be appreciating that the equity market and economic crash we saw in February and March isn’t like any of its predecessors, simply because the coronavirus outbreak, while horrible, is only a transient issue – and as a result, once economies are fully reopen, economic growth will recover rapidly and bring back most of the jobs that have been lost due to the coronavirus lockdown restrictions.

Although the deteriorating US/China relations cast a big shadow over equity markets in the past couple of days (for example, the FTSE-100 fell 142.19 points or 2.29% today, Friday 29 May 2020), today’s late press conference by Donald Trump (6:30pm UK time) was mainly just tough talk as his actions were underwhelming and he certainly didn’t throw down the gauntlet to China:  he criticised China for passing new national security laws for Hong Kong and said that the US will take action to stop some Chinese nationals entering the US and would strip Hong Kong’s special trading status, he did not pull out of the Phase 1 trade deal with China.

As we have previously said, we expect lots of bombastic rhetoric from Donald Trump ahead of the Presidential elections in November – and while this rhetoric is likely to keep equity markets on edge (meaning equity market volatility will remain elevated), it is unlikely to significantly hurt the current overall positivity surrounding the economic reopenings and potential coronavirus vaccine.

Even though the FTSE-100 ended May with a 2.97% gain (its second straight winning month, after rising 4.04% in April), it is unfortunately still down 19.43% since the start of this year.

Although our long-term growth portfolios are diversified across a variety of asset classes (equities, fixed interest and cash) and geographies, such as Europe, Asia and the US; and we have a disciplined investment process, unfortunately this hasn’t stopped client portfolios from falling, although it has helped to protect against bigger losses – as over the same period a typical Cautious portfolio is down 5.63%; Balanced -10.18%; and Adventurous -8.30%.

Looking ahead to this coming week, once again our focus will be on the US weekly jobless claims data on Thursday (4 June 2020).  Other key US data releases include ISM manufacturing on Monday (1 June 2020) and employment data (non-farm payrolls; unemployment rate; participation rate) on Friday (5 June 2020).

We also have Eurozone unemployment rate; retail sales; and an ECB meeting where we expect the size of its Pandemic Emergency Purchase Programme to be increased given the deteriorating Eurozone economic data.

Elsewhere we have Chinese PMI data and of course Brexit negotiations enter June with both sides talking discouragingly – and 30 June 2020 is the deadline for agreeing any extension to the transition agreement.

Consequently, please keep reading or watching our regular market updates to stay on top of our thoughts and views for all these market moving events.

Investment Management Team

Monday 1st June 2020

As we wrote in the weekly update, Donald Trump’s response to China’s new security laws in Hong Kong was actually fairly muted – and as it lacked significant action, it was much less damaging than we all feared (for example, there weren’t any new trade tariffs, meaning the US/China Phase 1 trade deal is still intact), which has helped global equity markets to open higher this morning.

Hong Kong’s Hang Seng index has just closed (9am UK time) up 3.36%, while China’s CSI 300 index rose 2.70%.  In the UK, the FTSE-100 is currently trading up just over 50 points or 0.90%.

Also helping sentiment was yesterday’s (31 May 2020) Chinese manufacturing and non-manufacturing PMI data.  The non-manufacturing index rose to 53.6 from 53.2 and although the manufacturing PMI declined to 50.6 from 50.8 this simply reflects the impact of global lockdowns – and remember 50 is the line separating expansion and contraction, so a reading above 50 signals the Chinese economy is expanding.

Additionally, today’s (1 June 2020) more export-oriented Caixin China PMI data rose to 50.7 from 49.4 – firmly indicating that Chinese factories are starting to buzz again.

Investment Management Team