InvestNow News – 12th June – Mint – Portfolio Returns & Commentaries – May 2020
Market overview
Ongoing fiscal and monetary stimulus around the world, and easing of lockdown measures helped global markets rally further in May. The Japanese Nikkei led the way +8.3%, with strong performances across the USA and Europe as well. The MSCI World index rose 4.8%. The NZX50 rose 3.3% and the ASX200 4.4%. Commodity prices rose as well led by Iron Ore, Oil and Gold. Global bond yields remained low in May, with the US 10 year government bond yield dropping 3bps to 0.64%.
Consensus expectations are for the global economy to enter a deep recession following the Covid-19 lockdowns. Does an awful economy equal awful markets? It certainly used to. However, central bankers are doing whatever it takes to cushion the blow, and fiscal expenditure is rising rapidly. Central bankers have announced US$9 trillion of monetary easing measures, and direct fiscal measures have climbed past US$3 trillion (indirect measures are more than double that). This is why markets have bounced back so quickly – there is excess liquidity in the system for the moment, which is over-riding earnings expectations.
In the meantime tensions between the US and China are simmering. China is implementing a new security law in Hong Kong, and the US responded with talk of removing Hong Kong’s special trade status.