The major world stock markets are down slightly for the week with Europe and the UK fairing the worst.
Quarantine rules hit travel stocks and there were more fears about the economic recovery from Coronavirus.
This is what the next few months are going to be like. Up and down markets as investors constantly scramble around trying to re-act to various bits of economic data. This particular recession is very hard to analyse as different sectors of the economy are all impacted differently. Until we see a vaccine or the virus dying out on its own, it is very hard to predict how the economy will recover and whether there will be another surge in the spread of the virus.
Having said that, as we write, the main US stock market, the S&P 500, has just hit a record high. Who would have thought that just a couple of months ago?!
There are a number of factors contributing to this. Huge support from government and the Federal Reserve plus the US finally appears to be seeing case numbers fall.
The US dollar has also been falling which helps attract investment from overseas as your pound will now buy more US stocks. Half of the biggest US companies’ profits come from overseas so a cheaper dollar means these profits are boosted when they bring them back home to the US.
It will be interesting to see how long and far this fall in the dollar goes as it could be seen as a negative for the strength of the US economy which in turn could mean investors take their money out of the US altogether.
In the UK it appears the housing market had its busiest month in more than ten years in July as house sales rose by 38% year-on-year. More properties came on to the market than in any month since 2008 and house prices hit record highs in a number of regions.
The increase in activity is not just down to the current stamp duty holiday. There is pent-up demand after the suspension of the housing market during lockdown and also people are changing their housing priorities after the experience of lockdown.
Inflation was up at 1%, its highest level in four months. This was mainly because of the price of fuel has risen from its March lows and also because people can now buy things again that they couldn’t previously during lockdown.
Our investment committee are still concerned about higher inflation going forward and we will look to make the necessary adjustments to our RTS Investment Strategy. Higher inflation will really impact savers as interest rates are at record lows. Of course this means you are then losing money in real terms.
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Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
