Input from Brewin Dolphin below in their weekly update ‘What’s Brewin’ received late yesterday afternoon (11/05/2020).
I hope you had an enjoyable bank holiday – the third in lockdown! The PM, in a televised address last night, has replaced his unquestionably clear message of ‘Stay at home. Protect the NHS. Save lives.’ with a rather more murky slogan of, ‘Stay alert. Control the virus. Save lives.’ to coincide with the easing of lockdown measures this week. In a bid to get the economy moving, while urging those who can work at home to continue doing so, he has encouraged people in the construction and manufacturing industries to return to work. However, this must be done in a way that respects social distancing, with guidance due to be published this week. The devolved nations have all chosen to keep the ‘stay at home’ message and lockdown measures in place, leading to a strategic divergence across the UK. It will be interesting to see how this develops over the next few weeks.
The major US indices rose on Friday; with the Nasdaq actually in positive territory by 1.7% YTD! This risk-on move came despite the depressing job reports that said the US unemployment rate spiked to 14.7% in April as the coronavirus forced a wide U.S. economic shutdown. That is the highest level since the Great Depression! However, there have been positive comments on the re-opening of parts of the economy and sentiment was boosted by a Xinhua News Agency report that Chinese Vice Premier Liu He, Trade Representative Lightizer, and Treasury Secretary Mnuchin spoke Friday morning to pledge to create favourable conditions for a Phase 1 trade deal. This comes as a relief to markets after tensions rose between the US and China over the pandemic.
There has been much recent discussion about the shape of the recovery. Today, we’ll look at the market rebound, which has been dramatic since the market lows in March. Some analysts are concerned with the speed of this recovery as the full impact of the pandemic has yet to be quantified. They argue that typically, following a bear market, the recovery is more gradual. However, some believe that this has been an unprecedented market event and historical comparisons are less important. I have included a chart below to provide some context.
Markets in a Minute
- The VIX, which is a measure of volatility, lost 11% to 28 on Friday. The last time it was at this level was 25 February and is off substantially from the mid-80’s in the midst of the crisis.
- Tesla says it is planning to restart production at its factory in California in defiance of local government orders demanding it keep the plant closed.
- Primark and Superdry have been boosted by opening shops in Europe
- Fitness group Peloton, has benefitted from the lockdown measures with huge numbers of people exercising at home on the internet-connected bikes it pioneered. Shares surged by 17% on Thursday’s open to reach a record high.
- Tickets for Walt Disney’s soon-to-be reopened Shanghai Disneyland sold out quickly, suggesting that consumers in the world’s second-largest economy are eager to get back to their pre-pandemic spending habits.
Stay safe and have a great week!
As you can see the consumer should help developed countries economies in their recovery. It is still very finely balanced globally; the virus needs to be controlled.
Brewin Dolphin are Discretionary Fund Managers in the UK offering both Managed Portfolio Services and bespoke discretionary fund management.
Steve Speed
12/05/2020