2Q 2020 Market and Economic Overview

The second quarter of 2020 followed what the report described as the biggest global economic contraction of the modern era, with the largest surge in unemployment and the most negative quarter for GDP on record. Equities nonetheless recovered strongly. The MSCI World Equity Index rose 18.66% over the quarter, while US equities rose 19.95%, German equities 21.29%, Japanese equities 17.82%, euro area equities 15.98% and UK equities 8.78%. The report noted that the S&P 500 and Nasdaq 100 were back near all-time highs about three months after falling by 30-something per cent, and that both were driven by a handful of large technology stocks.

The report described the scale of policy support as unprecedented. Governments provided the largest collective fiscal injection on record and central banks expanded asset purchases. The US Federal Reserve bought individual corporate bonds, including some high-yield bonds, as well as municipal bonds, in addition to Treasuries and mortgage-backed securities. The world had entered the crisis with record debt-to-GDP levels, and US employment fell to levels not seen since the recessions of 2003 and 2009. The report noted a risk of policy fatigue in the US as fiscal support measures expired, while Europe had been slower to respond.

Geopolitical developments included continuing exchanges between the US and China, notably over new Chinese security laws for Hong Kong. In the UK, the report said the end-2020 deadline for an agreement with the EU looked increasingly unlikely to be met. Inflation was 0.10% in the US, 0.30% in the euro area, 0.50% in the UK and -1.30% in Switzerland, and policy rates were 0.25% in the US, 0.00% in the euro area, 0.10% in the UK and -0.75% in Switzerland.

In currencies, the euro rose 1.83% against the US dollar over the quarter to 1.12, sterling was little changed at 1.24, and the dollar fell 1.43% against the Swiss franc to 0.95. Gold rose 13.39% to USD 1,781.67. The report also discussed the effect of the pandemic on structural trends such as e-commerce, de-globalisation and reshoring.

Important information: This snapshot summarises MWC Group's market commentary for the period shown and is provided for general information only. It is not investment, tax or legal advice, a personal recommendation, or an offer or solicitation to buy or sell any investment, and it does not take account of your personal circumstances. Views and figures reflect conditions at the date of publication and may since have changed. Past performance is not a reliable indicator of future results. The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. Exchange-rate movements can affect returns. Market data comes from third-party sources believed to be reliable, but its accuracy cannot be guaranteed. Please seek personal advice before making any investment decision. Issued by Manentia Wealth Consulting Group Limited (C80087), licensed by the Malta Financial Services Authority.