8 April - updates from our investment partners

  • 8th April 2020

Today's latest update from our investment partner Brooks Macdonald

What has happened

The US market closed in negative territory despite a buoyant European session and the US index being up over 3.5% earlier in the day. This late sell off appears linked to the fall in the oil price which in normal markets may not spook sentiment but at a time with little other information, was sufficient. After the markets closed Donald Trump announced that he had had constructive conversations with the leaders of Saudi Arabia and Russia which had increased his expectations of an end to the oil price war between the nations. This helped stabilise the price of the commodity in overnight trading.

What does the latest viral data tell us

In terms of new case growth, this key metric continued to improve in New York State and the UK which is critical for investors looking to extrapolate the slowdown in Italy to the broader Western economies. The UK daily date of change has moved down to 7% compared to 13.2% five days ago, therefore confirming the weekend’s slowdown. Fatalities actually picked up globally however the market focus is on the new case growth as this is the lead indicator for the future pace of the infection.

What’s the latest on the Exit strategy

Austria paved the way earlier in the week by setting out its strategy. Whilst Germany has extended the restrictions to 19th April, reports indicate that the government may look at easing restrictions post that date including the reopening of schools. Expectations are that this reopening will be conditional on several measures being imposed including limitations on gatherings and technology to aid contact tracing. Norway also followed this pattern allowing schools and universities to reopen from 27th April.

What does Brooks Macdonald think

The absence of new news will lead to days like yesterday where a strong rally can evaporate quite quickly. The important point is that new case growth continues in the right direction and this is critical to allow investors to look ahead to the exit strategy rather than worry about the very poor data releases. We are still keeping a close eye on the US numbers as there are several states that remain ‘open’ without mandatory lockdowns. If outbreaks do occur in these areas we may well see a need for a nation wide lockdown which may extend the timeline for the US exit strategy. This would have knock on impacts for global supply chains which may act as a dampener on growth as Europe returns to normality in June and July. At the moment markets seem sufficiently pleased by the headline numbers improving but this remains a risk to the full reopening of the global economy.

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