07th September 2020

Good morning,
Tech stocks fell sharply last week, as markets were hit by their largest falls since June. However, it is worth noting that this came on the back of four consecutive positive weeks for the S&P 500 which led markets to their best August since 1984. Whilst large negative days are never welcome, it serves as a useful reminder that volatility is part of investing. Indeed, even a few weeks’ of perspective goes a long way.

The growing influence of the Tech sector on stock markets has been a key theme of markets for a number of years, and this has been accentuated in 2020. It is something we are cognisant of within our portfolios, and are keeping a watchful eye on. For example, Bank of America Merrill Lynch reported last week, when compared with the MSCI indexes, Zoom is worth more than Mexico, Tesla more than Brazil, and Apple the UK.

Australian GDP for Q2 saw its largest fall (-7%) since records began in 1959, as the country slipped into recession. This in itself isn’t that remarkable given the damage wrought by the pandemic. It is however, the first Australian recession in over 30 years – highlighting once again that there have been few hiding places from COVID-19.

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.

Weekly Investment News
Global markets moved lower last week, as Tech stocks fell for two consecutive days following a massive run up in recent weeks. Rumours abounded regarding the impact of derivative positions as larger daily swings become a more permanent feature of stock market movements. The key US market will pause for breath today, as it will be closed for Labor Day. US non-farm payrolls provided a positive finish to the week as the economy added jobs for the fourth consecutive month, with over half the jobs lost since the start of the pandemic now recovered. The unemployment rate also ticked down significantly and now stands at 8.4%. Whilst the recovery in the labour market should continue, the pace of job growth is likely to moderate from this point.

Within the eurozone, inflation data surprised to the downside, as prices in the currency bloc in August coming in lower than they were a year ago. Given the amount of stimulus already in place, it will provide plenty of food for thought for the ECB ahead of its policy meeting this Thursday. Brexit negotiations also continue in London this week, with both sides publicly commentating on the lack of progress in recent weeks. The Financial Times reported over the weekend that Boris Johnson is set to ‘override’ the withdrawal agreement, raising the stakes once more.

In terms of the virus, US cases remained somewhat steady last week, although the news was less positive in Europe. UK cases rose the most in three months with Germany and France also seeing a spike in numbers. With schools and universities returning this week, authorities are entering a crucial period.

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