May 2020 - Markets in a Minute

Posted by siteadmin on Friday 12th of June 2020.

Looking back at the month of May 2020 (and a bit further)

For this month’s Markets in a Minute we thought it would be a helpful time to reflect not only on the previous month’s market activity but to demonstrate the performance of invested funds over this period.
 
As we start to emerge from the initial downturn we thought you would find it interesting to see that your investment funds have far outperformed direct investment in stocks and equities as seen in the FTSE 100. This is illustrated in the chart below which shows three different risk profiles against the FTSE 100 index, showing these fund values have either stayed neutral or are indeed up on investment values this time last year. Your investments did not experience the extremes of volatility seen and discussed so broadly in the media.

Your investments have been carefully monitored throughout this period and we believe this success is attributable to the approach we have repeatedly encouraged since the onset of the pandemic:

  • Staying invested, weathering the storm and looking long term
  • Working with market leading investment managers
  • Diversifying portfolios to help protect the down side and benefit from some bounce back
  • Topping up investments, if you can, when markets are low

There are no doubt still tough times ahead. But as your Advisers, we will continue to work hard to ensure all of these elements continue to come together for your benefit.
Investment fund performance vs The FTSE 100 Index year on year

A: Low Medium Risk (5)
B: Lowest Medium Risk (4)
C: Low Risk (3)
D: The FTSE 100 Index

 

Positivity continues 

The month of May continued the broadly positive trend for global equities seen in April, with almost every region positing solid gains for the second month in a row. The FTSE 100 is now 22% above is March lows and the S&P 500 up 26.8% in Sterling terms. This technically puts both markets in to ‘bull market’ territory which is commonly defined as a situation where stock prices rise by 20% in a short period of time.

This positivity has been largely attributable to central bank support packages as well as the optimism surrounding the reopening of global economies. The hope is this is the start of a path towards a return to some sort of normality.

The US, Japanese and European markets posted the largest rises in May, as steps towards a reduction in containment measures continue.

  • Sectors such as technology have continued their buoyant mood as investors digest how the technological advances that the public have adopted during the lockdown, may lead to a long term changing of habits, whether this be in the way we communicate or the way we shop.
  • The rebound was driven by a combination of expanding stimulus programmes, hopes of progress on vaccines and therapeutics, and news of economies easing their lockdowns.
  • Gilead Science’s drug Remdesivir was given fast-track approval in the US and will be given to patients as early as this week.
Market Performance 1 - 31 May 2020 (in GBP) 
  • FTSE 100 +5.83%
  • S&P 500 (USA) +9.27%
  • FTSE Europe Ex UK +7.26%
  • Topix (Japan) +9.99%
  • MSCI Emerging Markets +3.14%

Many Americans financially better off 


Yes, you read that right. Data confirmed in May showed American’s saving rate increasing at huge pace along with personal income for US households.

  • Stats showed that personal income was almost $2trillion higher in April than in March and oddly, much higher than in any point in 2019. But how can that be? Well, in the States, unemployment insurance has been increased well above the minimum wage and in certain parts it’s even higher than the average wage. This results in many people receiving a notable boost to their wallets.
  • Further confirmation came from US banks stating a reduction in credit card debt amongst consumers over recent weeks too. A lot of this extra cash is piling up, causing a so-called ‘savings overhang’ due to the fact there’s not much beyond food and digital services that you can spend your money on right now.
  • Personal savings has jumped from roughly $1.3trillion each month before the pandemic to $6.1trillion in April, according to the US Department of Commerce. This ‘savings overhang’ could provide much needed economic boost once containment measures are relaxed.

Now is not a time to get complacent 

While the positive numbers seen recently are welcome, parts of May saw notable spikes in volatility, serving as a stark reminder of just how fragile market sentiment is right now.

  • Flair-ups of new cases within re-opened regions dented recovery hopes and will continue to do so moving forward.
  • Federal Reserve Chairman Powell stated that a full recovery would likely take time to manifest which knocked sentiment. Powell did re-affirm the central bank’s ability and willingness to further add support as needed to combat the current crisis. He also highlighted the likelihood that the economy should begin to recover later this year, though cautioned that economic activity would likely be below the level at which it began 2020.
  • Increasing tensions throughout May between China and the US over the situation are giving investors reason to be nervous.
  • A collective sigh of relief was felt in markets when his recent speech lacked any direct threat of immediate reaction against China. Most importantly, there seemed to be no intention to pull out of Phase 1 of the trade deal signed just a few month ago.

This is a situation our investment partners will continue to monitor closely.

We hope you find this information useful and as always, please let us know if you have any feedback, questions or concern by emailing us directly or the office at: office@face-uk.com.

 
 

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