OCM Commentaries

Market Commentary 10th September 2020

By September 10, 2020 September 11th, 2020 No Comments

US Markets Falter on Big Tech Selloff

The selloff in US markets continued into this week, led again by mega cap technology stocks in the US, as investors took profits on positions and re-evaluated company fundamentals amid economic developments. After a series of intra-day declines, US indices appear to have stabilised in the past couple of days, highlighting the persistence and strength of the recent rally in global equity markets. The S&P 500 edged higher in recent trading sessions, despite cracks appearing in recent labour market data. Meanwhile performance in Europe and the UK remained volatile ahead of the European Central Bank meeting as investors awaited the latest developments on monetary policy economic forecasts. Brexit developments also weighed on investors’ minds this week, as Boris Johnson stirred up negotiations with his plans to tear up parts of the Brexit Withdrawal Agreement. Nonetheless, equity markets in Europe and the UK posted gains over the week as positive momentum remained in place.

US Job Losses Persist

New data published this week suggests that the number of Americans filing new claims for unemployment benefits remains at elevated levels compared to recent months, a sign that extensive job losses are persisting as the nation struggles to control the coronavirus. Initial jobless claims were unchanged this week, totalling 884,000, but due to a change in the methodology for seasonal adjustment earlier this month, the figure is only directly comparable to the prior week. Though claims have dropped from a record 6.8 million at the end of March, layoffs persist across industries as many companies have exhausted government loans to help support wages. The unexpectedly high levels of claims underscore the uneven nature of the labour market’s recovery, strengthening views that the US labour market is settling into a more gradual path to recovery after an initial strong, but short lived, rebound.

On the back of recent data, economists are becoming concerned that the US labour market could take years to return to its pre-pandemic levels, and are urging the White House and Congress for another rescue package amid a setback in the quest for a vaccine. However, with lawmakers at a stalemate over additional jobless benefits and Presidents Trump’s stopgap aid ending, unemployed Americans face significant challenges over the coming months. In addition, rising virus cases in some parts of the country are applying additional stress to certain parts of the economy.

European Central Bank Keeps Policy Unchanged

On the conclusion of the ECB’s most recent policy meeting, investors watched closely today for signs of a potential shift in policy as the Eurozone economy grapples with rising coronavirus cases and a strengthening common currency.

Following the recent surge in the value of the Euro, some economists have called for further stimulus from the ECB to avoid undermining the economic recovery and weakening inflation. A stronger Euro makes Eurozone exports less competitive and drags down inflation by lowering import prices, weighing down economic growth.

Following the US Federal Reserve’s new policy approach of average inflation targeting, investors were also looking to see if the ECB would adopt a similar outlook, especially after comments from Chief economist Philip Lane that the recent euro strength did matter. The argument was strengthened even further when the region slipped into deflation last month for the first time in four years after consumer prices fell 0.2% from a year prior.

In her speech today however, European Central Bank President Christine Lagarde didn’t signal any pressing desire to adjust monetary policy, though she did say that the surging Euro must be monitored for its impact on prices. The bank’s bond buying programme was left unchanged at 1.35 trillion euros and the interest rate at -0.5%, with officials reiterating Lagarde’s message stating that incoming information will be carefully assessed, including developments in the exchange rate and its implications for the medium-term inflation outlook. Moving forward, most economists expect the ECB to expand its €1.35tn emergency bond-buying programme as early as December if inflation shows little sign of bouncing back from its recent lows. The Euro strengthened further following the meeting, coming close to the two-year high it reached when it climbed above $1.20 last week.

Brexit Risks Return

Brexit negotiations dominated headlines this week, after the UK government announced it is preparing to break international law in order to establish a better relationship on the UK’s boarder with Northern Ireland. Investors have begun to price in expectations for greater volatility in negotiations this week, with concerns that the EU may now be even less willing to compromise on the two key negotiation points: Fishing and state aid.

Financial markets and news headlines will be increasing the amount of attention they give to Brexit negotiations over the next few months, as negotiations continue up until the artificial 15th October deadline for a deal set by Boris Johnson. Speculators have commented on whether Boris Johnson truly believes his threats that he is willing to accept a no deal option, or whether he is simply posturing to get the EU to compromise. Time will tell on the credibility of each side’s threats.

For more information on this week’s developments in Brexit negotiations, please see attached the Market Update Document

Our Positioning

Following recent profit taking on key positions within the portfolios, over the week we reallocated cash into new positions, adding exposure to investment grade and high yield corporate debt in the place of government bonds, while reallocating previous US large company exposure into US smaller companies and global clean energy exposure. These changes are expected to allow portfolios to benefit from improving economic conditions in the medium term, while also gaining access to key sectors and themes following a shift in consumer trends and behaviours. As we see more evidence that economic conditions are improving, we may use some remaining cash within our more cautious portfolios to top up existing positions – giving us more flexibility to adapt to changing market conditions moving forward.

Key Events We Are Watching This Week:

  • Friday: UK Manufacturing and Industrial Production, UK Balance of Trade
  • Monday: EU Industrial Production
  • Tuesday: UK Unemployment Rate


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 continued to display high levels of volatility over the week as countries across the world battle with virus challenges, mixed economic data, and stimulus expectations. Over the week, the major indices experienced mixed performance on rising virus cases and mixed economic data which varied significantly between regions. The portfolios remained relatively robust in the face of market volatility over the week, benefitting from a high level of diversification in asset classes and geographies.

Looking ahead, we are optimistic on the medium-term outlook from here, accepting further volatility in the near term, but confident in our positioning, with well diversified portfolios which have been designed to weather these market conditions. Year to date, we have now recovered from the March coronavirus decline, and we are in a strong position moving forward.



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


In this day in 2014, the first official Invictus Games was held. The international games bring together wounded armed forces personnel and veterans who compete in athletic competitions. The 2014 Invictus Games were held at the Queen Elizabeth Olympic Park in London.



Have a great week,


Jason & Gina