24 June - update from our investment partner
- 24th June 2020
What has happened
Markets trod a familiar path yesterday with optimism during the European session being moderated as new case growth figures were released during US trading hours.
US New Cases continue
There was relatively little good news from the US with Florida, Texas, California and Arizona all seeing case growth stubbornly above 3% and Arizona rising by almost 7%. There has started to be some recognition that lockdowns may be needed with California Governor Newsome stating that whilst it was not his preferred option he may be prepared to revert to restrictions if needed. As the global economy starts to reopen there will be a growing fear of missing out on the hoped initial snap back in pent up consumer demand. Countries will need to weigh up this fear with the risk of needing a more dramatic lockdown in the future to stem a larger outbreak. Tellingly EU officials are said to be considering excluding the US from plans to reopen borders given the inability for the US to control the virus at the moment.
UK lockdown eases
After two days with the daily infection rate below 1,000, the United Kingdom has continued its easing of lockdown with large parts of the hospitality sector reopening on 4th July. The two-metre social distancing rule has also been amended to ‘one-metre plus’ in situations where the two-metre rule is not possible. The hospitality and leisure sector has been hit hard by the COVID-19 outbreak so this news will be welcome although it does remain to be seen whether social distancing, even at the one metre level, makes some of the lower margin hospitality business models unprofitable.
What does Brooks Macdonald think
In the tug of war between the weight of stimulus and new cases, the stimulus still has the upper hand allowing market volatility to drop and equities to gradually rise. The US situation will certainly elongate the economic damage of the virus however, as the United States is such an important trade partner to most of the countries gradually reopening. More positively North Korea have suspended military actions against South Korea meaning geopolitical risks recede slightly as we near the end of June.
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