Equity markets last week continued their upward trend, with the Nasdaq powering ahead to new all-time highs and the S&P 500 showing solid gains. Economic data continuing to suggest a bounce back in major economies from lockdown lows, supportive monetary and fiscal policy and continued progress on developing treatments and vaccines for COVID-19, are all supporting the positive sentiment in equity markets. There is a growing feeling that we are past the worst of this crisis, and we would tend to agree.
However, it is still too early to get complacent. Politicians in Washington have announced they will maintain a 15% tariff on Airbus aircraft and 25% tariffs on European goods including wine, whiskey, olive oil and cheese. The phase one trade deal between the US and China has been postponed. The ‘trade war’ risk never really went away!
Evidence also indicates that COVID-19 spreads seasonally, indicating that Northern Hemisphere countries (the bulk of the world economy) could face a ‘second wave’ in the winter. Despite great strides being made in fighting the pandemic, we are still some way off beating this disease. This risk remains high and something that should temper investor optimism.
While we are happy to benefit from the market’s current positive mood, we remain aware of the risks facing the global economy and markets. For that reason, we are reiterating last week’s investment strategy update. What we’ve been doing has worked well for our investors, especially in 2020. We focus on investing in high quality, high growth businesses. In an uncertain world where growth is increasingly hard to come by, our investment strategies offer investors an equity exposure we believe is optimised to continue to grow through this crisis and beyond.
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