Lockdown Easing Continues, President Trump Faces Fresh Challenges at Home
Markets continued to rebound over the week as investors focused on the easing of lockdowns across the globe, with May PMI data supporting expectations that the economic data found a bottom in April as activity ground to a halt over the month. As we start to return to normality following the pandemic, markets overlooked near term economic weakness and social unrest in the US over the week, leading stocks to advance on optimism for a rebound in activity and strong growth in 2021. As markets moved higher, Goldman Sachs announced a U-turn in its strategy as it abandoned its call for another steep sell-off in equities, while Credit Suisse now forecasts that the economic bounce back post-virus may be quicker than already priced in.
President Trump Criticised for Protest Response
After coming under pressure for his administration’s handling of the coronavirus pandemic in recent weeks, support for President Trump waned over the week as violent protests erupted across the US in reaction to the death of George Floyd, an unarmed black man who died in police custody in Minneapolis on 25th May. Floyd’s death has drawn widespread support for the Black Lives Matter movement, and tensions continue to run high across the country. The President has faced harsh criticism in his response to the incident, taking a hard line on protestors and threatening to call in the military to quell violence in key US cities.
For more information on recent unrest in the US, please see the attached Market Update document.
Sterling stages a recovery
Over the week, the pound surged to its highest in over a month against the dollar on speculation that this week’s Brexit talks might start to yield some progress. While the UK and the EU have shown few signs of ceding ground, the Financial Times has reported the potential for compromise from London ahead of the 1st July deadline to extend the Brexit transition period beyond this year. After slumping in May on poor economic data and a stalemate in Brexit talks, the easing of lockdowns is now improving global sentiment for riskier assets and putting the dollar under pressure, helping to lift sterling. That being said, there’s still potential for negative headlines in the coming weeks, with investors focusing on the next EU summit later this month for clues on the progress on talks as well as signs of economic recovery.
Key Events We Are Watching This Week:
- Thursday: Euro Area Retail Sales, US Jobless claims, US balance of trade for April
- Friday: US Non-Farms Payrolls
- Sunday: China Balance of Trade for May
For anyone who wants further data to substantiate the position please review the attached Global Economic Update document and the Economic Dataset below.
Model Portfolios & Indices
Global stock markets remained volatile over the week as the global economy eases lockdown restrictions following the Covid-19 pandemic. Over the week, despite turbulence regarding US-China relations and US protests, most of the major indices gained as optimism over a recovery in economic activity and central bank movements offset concerns over near term weakness.
The portfolios gained over the week, benefiting from a high level of diversification as equity and bond assets gained over the week. Over the coming weeks, as we are now normally invested, we expect intraweek performance to be more in line with the benchmark once again, and we are optimistic on the medium-term outlook from here. The Q1 drop in portfolios and indices is hugely disappointing, however we remain optimistic about a growth pickup in the second half of the year, allowing us to regain lost ground.
Important Information
Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value. You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio. The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations. Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges. Unless stated, income is reinvested into the portfolio. The information contained in in this document is for information purposes only. It does not constitute advice or a recommendation or an offer or solicitation for investment.
This Day in History
On this day in 1989, the student-led Tiananmen Square protests calling for democracy, free speech and free press in China were halted by a bloody crackdown by the Chinese government. It is estimated that hundreds to thousands of protestors were killed and around 10,000 were arrested. To this day, the event remains a taboo subject in China.
Have a great week,
Jason & Gina
