Weekly Market Recap

A narrow rally

07/09/2020

Week in review

Australia GDP plummets 7.0%q/q in 2Q.
RBA holds rates, increase lending to banks
China PMI for manufacturing rises to 53.1

Week ahead

Australia business confidence
Australia consumer confidence
Australia housing finance

Thought of the week

The S&P 500 is up just over 10% for the year and more than 50% from its low in March. However, not all companies have benefited from the rally. This week’s chart compares the performance of the S&P 500 to the S&P 500 excluding some high profile companies (Microsoft, Apple, Google, Amazon and Facebook). These companies have grown significantly in size and there is a growing concern that investors are placing too much weight on these tech and online behemoths, increasing the risk of a correction. It is possible that market nerves in the U.S. heading into the U.S. Presidential election could see some profit taking, but this should not distract from the long term secular story in tech. This is not the market of 1999/2000 when company valuations soared on the promise of future revenues. Revenues are being delivered and we are only on the cusp of what a technology revolution in cloud and AI could eventually look like.

S&P 500: The split market

Rebased to 100, 31 December 2019

Source: FactSet, Standard & Poors J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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