29 June - update from our investment partners
- 29th June 2020
What has happened
US COVID-19 case numbers continue to be the swing factor in markets with European indices tending to be directionless until the latest figures are released. Indeed, we saw a sell-off late in the US session on Friday as new cases continued to tick up in Southern and Western states.
Fatalities, the key figure
The fatalities numbers have not yet followed suit however and this is the hope that markets are holding on to. The global healthcare system has become far better at tackling the virus with a University of Oxford study showing the hospital fatality rate was 6% in March/April and now 1.5% in June. There are many factors at work in the overall statistics, but it does appear that effective treatment is at least playing a part in keeping death figures under relative control. The governmental approach to Coronavirus has always been a balance between the economic and human impact, if fatality rates remain suppressed this will allow a more liberal approach to lockdown even as cases rise. We have already seen some of the most affected states start to slow their lockdown easing but keeping the death rate lower will be key to avoiding a reversal back into some of the more draconian measures employed in New York City at the peak of the outbreak.
Where’s the stimulus
With the current sustained pickup in US new cases putting pressure on the economic reopening we expect to see movements forward in the latest US fiscal stimulus plans in early July. In the UK, Boris Johnson is set to make a speech on Tuesday outlining an infrastructure plan whilst also not countenancing matching austerity. Finally, in Europe, Merkel and Macron are due to meet today to discuss, amongst other items, the EU recovery fund. Given the pair’s role in developing the first proposal for this fund, the meeting today may try to forge a compromise between their grant heavy package and the loan-based proposal of the so called ‘Frugal Four’.
What does Brooks Macdonald think
This week will be shortened as Independence Day is being observed a day early on Friday, meaning US markets will be closed. As a result, the major data point of the week, the US employment report, will be released on Thursday and markets go into this reading with far more optimism given the impressive beat shown in May’s figures. For the time being though the only numbers that matter are the COVID-19 new case and fatalities figures in the US which will likely determine the day-by-day equity market moves.
Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.