Market comment – 4th May 2020

Despite a sell-off on the last day, April was one of the strongest months for global equities for many years.  US stocks were a whisker away from recording their best rise since 1974.  This left stock markets well out of bear market territory (a fall of 20% or more) with the US down only 10% for the year to date.  Too much too soon?

Markets have been looking at the progression of COVID-19 across the world and the good news is that many countries have passed the peak of the virus and are beginning to start easing lock-down restrictions.  Clearly, the quicker this happens the sooner things can get back to normal.  Simple really but not quite as simple as it first appears.

The current economic disruption is unprecedented and the rate at which recovery can take place will partly depend on how much of what is currently shut down can safely reopen, and when.  There is also the psychological effect on individuals.  How long before they feel comfortable travelling and socialising again?  These things will take time.

Meanwhile central banks and governments are spending trillions of dollars to keep markets functioning and assisting economies and individuals in lockdown.  This is all good news.  To temper it slightly however, we need to ask how quickly demand will recover and how many businesses will ever get back to the position they occupied before the pandemic broke out.  Markets are right to focus on the positives, but they shouldn’t underestimate the Herculean task of getting the global economy on its feet again once the health risk has substantially diminished.

Is it a coincidence that April was the sunniest on record?