Good Morning,
Market commentators spent much of 2019 analysing the US trade tensions, before the issue took somewhat of a back seat with the onset of the COVID crisis. However, the narrative has come back with a bang in recent weeks and escalated further over the weekend with the Chinese foreign minister warning some in the U.S. are pushing relations into a “New Cold War”. As it has been for much of this dispute, the tangible implications of rising rhetoric remains to be seen. The US election is also beginning to come back on centre stage with both National Conventions within three months, whilst the election itself takes place in just over five months.
In corporate news, car-rental giant Hertz filed for bankruptcy late Friday evening, citing the collapse in air travel as a result of the pandemic as the main reason. It is a stark reminder of the negative ‘trickle-down’ effects of the COVID-19 virus on a wide range of business activities.
This contrasts sharply with the fortunes of video conferencing firm Zoom, which saw another week of gains. They say you have made it if you become a verb, and to ‘Zoom’ has now entered all our vocabularies. The company is now worth more than the seven biggest airlines in the world combined. Whilst this may not persist, it does provide an interesting snapshot of where the world stands today.
As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.
Weekly Investment News
Markets ended the week broadly flat, as a strong start to the week from tech firms faded into the Memorial Day Weekend with the US-China trade tension coming to the fore once more. The rising rhetoric of recent weeks turned into action as the US blocked a government pension fund from investing in Chinese equities, whilst moves from China to tighten its grip on Hong Kong drew condemnation from the US and led to the return of protests to the semi-autonomous region.
News flow regarding vaccines continues to come unabated with Moderna announcing positive trials on Monday, only to see the excitement fade as authorities failed to share in the initial enthusiasm. There was further optimism from the EU and Angela Merkel and Emmanuel Macron agreed to support a 500 billion-euro aid package to help the European Union recover from the coronavirus in a major step toward tighter integration. Germany would be providing the lion’s share of the funds, but a note of caution is that all 27 member states need to ratify any deal.
All 50 US states have now started to roll back restrictions, albeit it at an uneven pace. It is still too early to tell what the implications of this may be. Policymakers are also adopting a ‘wait-and-see’ approach in the short term with Republicans preferring to analyse how the already enacted measures play out. Fed Chair Powell emphasised how there was ‘no limit’ to what the Fed could do but the consensus amongst market commentators is that Powell would like to see more movement on the fiscal side first.