Market Overview – 08/09/2020

After an extraordinarily strong August and first few days of September, global share prices experienced a sharp sell-off on Thursday and Friday. This was particularly noticeable in the technology space, with the US Nasdaq Index falling by 6% over the two-day period. The broader index was less impacted, but still fell by over 4%. This needs to be placed in some kind of context however. The US market has risen strongly since the lows of March (60% from trough to peak) and some sectors were arguably looking overbought in the short-term. Was there a particular reason for last week’s volatility? Many commentators are pointing the finger at Japanese conglomerate SoftBank which appears to have built up large derivatives positions in a number of US technology related names such as Tesla and Apple. This contributed to the sharp rise in their (and others) share prices over the last few months, culminating in the sell-off seen late last week. In total, however, it looks more like a healthy correction than anything more worrying.

As countries continue to open up their economies, you have begun to see a stock market rotation out of some of the “stay at home beneficiaries” into more “back to normal” names. Recent data points to a pick-up in the housing market and increasing car sales. While some of this is simply pent-up demand, these trends should continue in the absence of further punitive lockdowns. It is fair to say, however, that the “new normal” will probably not look like the “old normal” as behaviours change. New sectors will replace old ones and we must never underestimate our ability to adapt and innovate. The investment landscape will continue to evolve and with it deliver exciting new opportunities!