Weekly Market Recap
Asia Pacific
04/05/2020
Week in review
- Australia inflation increases 2.2% y/y in 1Q
- U.S. 1Q20 real GDP contracts-4.8% q/q annualised
- China’s PMI manufacturing eased to 49.4
Week ahead
- RBA policy announcement
- Australia housing finance
- U.S. nonfarm payrolls
Thought of the week
The speed with which the U.S. equity market has rallied of its March low is almost as remarkable as the speed with which it fell from its February high. The rally has been fuelled by the epic levels of monetary and fiscal stimulus and the prospects for easing social distancing measures. However, the breadth of the rally has been rather narrow and not led by the traditional cyclical sectors. Healthcare and technology sectors have outperformed based on their perceived defensive characteristics. The top five stocks in the S&P 500 now account for 20% of the overall index and it is the combination of their size and potential for earnings resilience that is lifting the market. It comes with a cost and that is a price-toearnings ratio of close to 20x, higher than the peak in February.
Leadership challenge: Top 5 stocks in the S&P 500
Market value of top 5 stocks as % of total index market value