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The June quarter saw markets and Also worth noting that the US political
economics continue their path of environment somehow got more toxic
divergence, with equity markets providing through the quarter with protests, riots,
one of the strongest quarters ever seen off and the general lack of law and order
the March lows, whilst the economic hurting the economic recovery whilst
outlook showed little improvement. increasingly the possibility of a 2nd virus
wave. Polls swung firmly in favour of the
Equity markets were buoyed by Democrats and presidential hopeful Joe
extraordinary government and central Biden during the quarter.
bank stimulus whilst virus contraction
rates began to peak in most countries Key on most minds was the potential
around the world, providing some government reaction to future virus waves
optimism regarding re-opening of and the “fiscal cliff” whereby most of the
economies and the beginning of an government stimulus measures put in
economic recovery. Optimism regarding place in March are set to expire in the next
the early development and availability of quarter. Absent an extension of these
vaccine also assisted in boosting investor measures, it’s fair to say that the
confidence and sentiment. economic and market outcomes will be
significantly adversely affected from here.
Government’s locally and globally Given the positive momentum in markets
continued to provide significant fiscal in the quarter, it’s fair to say that investors
stimulus to fill the void created by believe significant re-lockdown measures
lockdown measures. The most significant are unlikely and that government and
of those measures related to supporting central banks support continues unabated
businesses to continue paying workers from here.
and supporting those workers that have
seen their hours reduced or lost their jobs.
These stimulus measures are significant Looking forward
enough to allow most workers, and even
those that have lost their jobs, to continue The outlook still remains mixed given the
consuming at high levels. Central banks path dependency of the virus, government
continued to maintain very low cash rates, health policy, and vaccine availability.
continued to provide significant support to Whilst virus cases continue to rise,
banks and the non-bank mortgage market, pleasingly hospital and death outcomes
all whilst they intervened in bond markets seem to be improving as healthcare
to lower borrowing costs for governments professionals apply new and different
and corporates. treatment methods. This should enable
greater health policy comfort ahead,
especially if we get a vaccine early in
Investors were also buoyed by better than 2021.
expected economic data versus the dire
expectations set in March. That’s not to Governments and central banks remain
say that the economic data was any better committed to doing whatever it takes to
in an absolute sense, nor is the economic assist with the economic recovery and
outlook any clearer, but investor spirits maintain the confidence of investment
were lifted by positive economic surprises markets. We think this support continues
and by the lack of a 2nd virus wave and for some time. As such, positive asset
continued re-opening. We also saw price momentum likely continues from
positive news out of Europe pertaining to a here, but some caution is needed given
greater fiscal union, with key players areas of both stress and extreme optimism
agreeing to come together to support the
European recovery effort in a coordinated
manner. Chris Lioutas
PSK Financial Services -
Chief Investment Officer
