Despite a quieter week for global markets, the S&P 500 edged passed its February pre-pandemic record high this week. This marks a milestone as being the fastest bear-market plunge (a market move of twenty percent or greater) followed by the second-fastest bear-market recovery in U.S. history. We also saw Apple become the first company ever to surpass a $2 trillion market cap value – this after the company was the first to reach the $1 trillion market cap value in Aug 2018.
Outside of financial markets, U.S. 2020 presidential elections captured the headlines with Joe Biden formally accepting the Democratic nomination to run for U.S president in the 2020 election to take place on 3 November. As it currently stands, Joe Biden is polling ahead of incumbent Republican president Donald Trump, although history has shown that three months is an extremely long timeframe in U.S. politics. Interestingly, should Joe Biden win in November, he will be 78, making him the oldest-ever U.S. president, topping Trump, who is 74.
Pfizer Inc. and BioNTech SE announced that the Covid-19 vaccine that they are jointly developing is on track to be submitted for regulatory review as early as October. Some analysts expect a vaccine to be approved for use by November in the U.S., a move which may give President Donald Trump a new foothold in the election. Staying with Covid-19 news, some countries are reporting a surge in new cases. Germany has ruled out any further easing of coronavirus restrictions after a recent surge in new cases, while Greece and Ireland have moved to tighten lockdown rules. South Korea banned large gatherings in Seoul to halt an infection flareup.
Minutes from the U.S. Fed pointed to a rockier road ahead with members expressing concern over the future of the economy, stating that the coronavirus was likely to continue to stunt growth and potentially pose dangers to the financial system. No mention was also made of changing the size or composition of the Fed’s asset purchases from a stimulus perspective.
Trade negotiations between the U.S. and China remain erratic. After the U.S. cancelled talks last week, the two countries now plan to reschedule trade-deal talks aimed at reviewing progress at the six-month mark of the agreement between the world’s two biggest economies. In the meantime, the U.S. has ended it extradition treaty with Hong Kong and suspended favourable tax treatments with the former UK colony. The U.S. State Department is also asking colleges and universities to divest from Chinese holdings in their endowments, warning schools of more onerous measures on holding Chinese company shares.
Global equity markets posted mixed returns this week. In the U.S., the S&P 500 (+0.72%) and Nasdaq (+2.66%) were stronger whilst the Dow Jones Industrial Average (0.00%) ended the week flat. China’s Shanghai Composite Index (+0.62%) also managed to end the week in positive territory. European markets including the FTSE 100 Index (-1.27%) and Euro Stoxx 50 (-1.08%) were softer along with the Nikkei (-1.58%).
Market Moves of the Week:
The JSE All Share Index ended the week down -1.97%, led lower by the resource (-4.32%) and industrial (-1.06%) sectors. Financials (+0.67%) along with the rand strengthened during the week with the rand trading at R17.15 to the U.S. Dollar by Friday close.
Chart of the Week:
This week’s chart considers how long it will take for gross domestic product (GDP) to get back to 2019 levels after the devastating impact of lockdowns on economies during the first half of this year. According to consensus forecasts, a third of countries will be there by 2021, and three quarters of countries will be there by 2022. Only a quarter of countries will take longer – a group which includes South Africa.
Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.
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The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any Strategiq product. Strategiq Capital is an authorised financial services provider (FSP 46624).