ICMYI: WEEKLY MARKET RECAP
As more and more states and countries open, there is growing concern about another wave of Covid-19 cases. There have been over 7.5 million cases confirmed worldwide. The U.S. & Brazil continue to have the highest number of cases (2 million & ~850,000 respectively). Oil prices continue to slide, and continued civil unrest has made social distancing all but a distant memory.
How is global economic growth?
Overall the global economy continues to struggle. A good indicator of how global growth is faring is to look at the decisions made by Purchasing Managers of Manufacturers. Purchasing Managers see the global economy still deteriorating with a slight improvement in Italy, Australia, Ghana, Saudi Arabia, Singapore, and Malaysia.
Some states that have reopened have seen an increase in the number of new cases. The markets did not take this news well. Stocks had their worst decline since March.
This week also saw the Federal Reserve’s semiannual report, which indicated that interest rates would probably remain near zero through 2022.
U.S. Unemployment & Small Business
The report also highlighted that 20 million jobs had been shed from payrolls with the hardest-hit group being low wage earners. The Fed Chairman Powell expressed concern that millions of Americans could remain permanently unemployed.
The pandemic has dramatically impacted nearly all small businesses (companies with fewer than 500 employees). Half of the small companies do not expect to return to their normal levels of activity within the next six months.
Fed Chairman Jerome Powell will appear in front of Congress twice this week.
European stocks gained on Friday after Thursday’s selloff due to Covid-19 concerns and the Fed’s outlook. The U.K. economy as a whole declined by 20.4% in April, according to a report released on Friday. It was the most significant drop the U.K. had ever seen.
The EU’s industrial output was down 28% in April, according to a report released by Eurostat last Friday. While there’s a slight uptick in production in Italy now, that was not the case in April when Italy, Luxembourg, and Slovakia had the highest decreases in production among member states. The bright spot was Ireland, which saw an increase (5.5%).
The number of new cases of Covid-19 continues to hammer the economy. Half of the world’s new Covid-19 deaths are in Latin America. The new cases and deaths are mostly due to the informal economy and workers that must choose between selling their products or wares in markets or going hungry.
Brazil continues to be one of the hardest-hit economies. Its GDP, the total monetary value of all goods & services produced in an economy, is expected to fall by 6.5% this year.
Asian markets were down due to continued concerns about a Covid-19 resurgence. New infections in Beijing led to increased precautions.
China is the largest manufacturer of smartphones and automobiles. China Manufacturing Purchasing Managers Index (PMI) serves as a good bellwether for production across the globe. There has been an increase in factory activity for the third straight month.
African Petroleum Producers Organization will meet later this week to determine how best to deal with the pandemic aftershocks.
The World Bank expects the Sub-Sahara Africa’s economy to decline by almost 3% this year.
The World Bank indicated that the South African economy could sink by 7.1% this year, the most profound decline in over a century. Nigeria reported the second quarter of a negative trade deficit, and Kenya has replaced Angola as the third-largest economy in the region.
Some numbers for people who like numbers:
The Dow Jones Industrial Average closed at 25,606 down 5.5% for the week
S&P 500 closed the week down 4.73% ending at 3,041
Nasdaq was down slightly (-2.3.%) ending at 9,589
MSCI EAFE closed at 1,768 down 4.2%