I hope you and your family are well. Below you will find a summary of this week’s market developments and related thoughts.
· After pulling back last week, North American equity markets advanced, with optimistic economic announcements and a potential COVID-19 treatment outweighing “second wave” fears.
· Ten U.S. states saw coronavirus numbers surge more than 50% in the past week, and a new outbreak in Beijing stoked fears of a second wave in China. Scientists at the University of Oxford said that a commonly available steroid, dexamethasone, reduced deaths in patients with severe cases of COVID-19.
· In the U.S., the Census Bureau announced that retail and food services sales were up 17.7% in May, the biggest monthly jump ever recorded. Weekly jobless claims in the U.S. were 1.5 million.
· The U.S. government was said to be considering a $1 trillion infrastructure package to boost the economy, and U.S Federal Reserve (Fed) Chairman Jerome Powell announced that the Fed will begin to purchase individual corporate bonds.
· Prime Minister Justin Trudeau announced that the federal government is working to extend the Canada Emergency Response Benefit (CERB) for workers who can’t yet return to their jobs, and that the government would provide a “fiscal snapshot” on July 8.
· Statistics Canada reported that manufacturing sales fell by a record 28.5% in April and 37.1% year-over-year. Consumer prices rose 0.1% in May, but were down 0.4% year-over-year.
· Geopolitical tensions heightened as North and South Korea, as well as India and China, engaged in separate confrontations. North Korea blew up an inter-Korean liaison office and rejected an offer by South Korea to send special envoys, while Chinese and Indian soldiers engaged in a deadly border clash.
How does this affect my investments?
Clearly, markets have taken an optimistic view of economic and pandemic-related developments over the last few months, focusing on positive data while brushing aside most concerns. Much of that may be related to the continued willingness of governments and central banks to step in with significant support at any signs of possible distress. We saw this once again this week with the Fed’s announcement regarding bond purchases, the Canadian government’s attempt to extend CERB payments, and the prospect of the Trump administration’s $1 trillion infrastructure package.
While this short-term reaction does not mean things will play out similarly in the future, it is worthwhile to note that amid a global pandemic and recession, with no certainty on an ultimate solution for COVID-19, markets have proven resilient. The plan we have built together is designed to benefit from that type of resilience over the longer term.
Gilchrist Financial Team
Sources: CI Investments Inc., newyorktimes.com, nypost.com, cnbc.com, cnn.com, and Financial Post