Market Update – 4th June 2020.

It was another day and another rally for global equity markets yesterday (3 June 2020), as the FTSE-100 rose 162.27 points, or 2.61%.  On Wall Street, the Dow Jones climbed 527.24 points, or 2.05%, while the S&P 500 index ended the day up 1.36%.

This may appear strange given the protests and unrest in the US, coupled with the escalating tensions between the US and China (the US is suspending passenger flights from China-based airlines and is rumoured to be about to name a number of Chinese companies as foreign missions), however equity markets continue to focus on the fact that the global economy is reopening much quicker than previously anticipated, which should ensure we get the V-shaped economic recovery that we have been forecasting.

In fact the fundamental background is shaping up to be very supportive for equities as the vast majority of data releases have strengthened noticeably from the previous readings and/or beaten expectations – for example, yesterday’s US non-manufacturing ISM report confirmed the green shoots in activity, rising to 45.4 in May from 41.8 in April (expectations were for a reading of 44.4).

While economies around the world are generally past their worst, there is still a wall of worry to climb – and given the recent strength of equity markets over the past couple of weeks (the extent of which, we can’t deny, has taken us by surprise), we are avoiding the temptation to take advantage of the recent rally by raising cash with a view to buying back in at a later date, as although we believe that equity market volatility will remain elevated, evidence shows the best outcomes come from taking a long-term approach as time in the market is much more important than trying to time the market – for a full explanation, please see our market update from 19 March 2020 here.

As for today, although the FTSE-100 has opened in a little more circumspect mood (and is currently little changed on the day), we await the ECB’s decision on its bond-buying program and the weekly US jobless data.

Investment Management Team