InvestNow News – 8th May – Mint Portfolio Returns & Commentaries – May 2020
Market overview
Global equities have risen by 28% since their March lows, and are now only 13% below their start of year levels. In April, the NZX50 rose 7.5%, ASX200 8.8%, the US S&P500 12.8% and the MSCI World index 10.9%. This despite a sudden and steep decline in economic activity. In the US, quarter on quarter GDP shrank by 4.8% (annualised) for Q1. Consensus forecasts imply a 30% fall in Q2 (again annualised). In the last six weeks more than 30 million people in the USA have filed for unemployment benefits. Yet, the markets are pricing a V shaped recovery.
The trigger for the April rally was signs of the Covid curve flattening and early indications around the world of easing lockdown restrictions – giving hope the world could start returning to normal. The fuel for the rally was the fiscal and monetary measures being taken overseas. In the US for example, the various Federal Reserve programs come to US4.2 trillion so far (nearly 20% of US GDP).
The balance sheets of major global central banks have expanded rapidly in just a few short weeks. As a result, money supply and liquidity have skyrocketed, feeding into asset prices. In the meantime tensions between the US and China seem to be flaring up again with various US officials accusing China of covering up the early stages of the pandemic. The US president has an election to win and needs someone to blame for the economic fallout of the pandemic.