Last night on Wall Street, the S&P 500 closed 3.41% higher. As a result, it is now 22.91% above its low on 23 March 2020 – which means it is now officially in ‘bull’ market territory (defined as 20% above its low) – although it remains nearly 20% below its peak on 19 February 2020.
As we write the FTSE-100 is up just over 80 points this morning, or 1.4%. However, the FTSE-100 officially remains in ‘bear’ territory (defined as 20% below its high) as it is up ‘only’ around 15% from its low of 4,993.89 on 23 March 2020.
While this is good news, it is still worth highlighting that the FTSE-100, at the close of business yesterday, was still 25.51% lower than it was on 5 January 2020, the date of your last paper Valuation Statement.
Over the same period our typical Cautious risked client is down 12.07%; Balanced -17.62%; and Adventurous -18.24%.
Although the minutes of the emergency Fed meeting on 15 March 2020 showed that policymakers advocated a ‘forceful’ response to the coronavirus crisis, unfortunately it didn’t tell us anything we didn’t all already know – i.e. it will keep interest rates near zero until the US economy weathers the storm and is on track to achieve full employment and stable inflation.
Consequently, of more interest will be Jay Powell’s (the Fed Chair) update on the economy, which will be given today (9 April 2020) via webcast at 10am in New York (3pm UK time), shortly after we get the weekly US jobless claims data (and remember over the past two weeks we have seen nearly 10m Americans applying for unemployment benefit).
Elsewhere, the price of oil has moved higher today after Algeria confirmed that the OPEC and Russia will meet to discuss an output cut of 10m barrels a day. While a 10m barrel reduction is unprecedented, thanks to the coronavirus lockdowns, demand has probably dropped by around 25-30m barrels a day!
Although market forces will naturally see oil production fall (especially by the US shale producers), we believe even with a 10m barrel reduction from OPEC and Russia, there will still be a significant oversupply, meaning today’s oil price rise is likely to be quickly reversed – and regular readers of our updates will know that we believe a low oil price will be a key contributor to the economic recovery once the coronavirus outbreak is finally contained and lockdowns are lifted.
Investment Management Team