Weekly Market Recap
Resistance to rotation
Week in review
- Australia business confidence rose in October
- Australia consumer confidence surges for November
- U.S. CPI inflation 1.2%y/y in October
- RBA policy minutes
- Australia labour market report
- China retail sales
Thought of the week
The news on the success of a possible COVID-19 vaccine triggered a severe rotation within equity markets from growth to value positioning. Over the last decade growth has consistently outperformed value, a trend that accelerated this year given the strong rise in internet and technology stocks. Historically, an economic recovery would see both a move into cyclical and value equities. However, so far this recovery has only seen the cyclical part of that move given the restricted outlook for sectors most impacted by COVID-19. The big question is can this rotation be sustained? Value experienced a short burst of outperformance in June, which was quickly unwound. More detail on the trials will be released in the coming weeks, but logistical challenges remain for distributing any vaccine as well as the public acceptance of one developed in a rushed process. In the meantime, investors are perhaps better to continue to view the equity market through cyclical improvements rather than broad growth and value style.
Market rotation may find resistance
Relative performance of value over growth, rebased to 100 Dec 19
JPMorgan Global Research Enhanced Index Equity Fund
To achieve a long-term return in excess of the benchmark by investing primarily in a portfolio of companies, globally; the risk characteristics of the portfolio of securities held by the Sub-Fund will resemble the risk characteristics of the portfolio of securities held in the benchmark.