Weekly Market Recap
Week in review
- Eurozone PMI composite index falls to 45.1
- U.S. PMI composite index rises to 57.9
- Australia capital expenditure falls 3.0% q/q
- RBA policy meeting
- Australia 3Q real GDP growth
- U.S. employment report and nonfarm payrolls
Thought of the week
Equity markets are trying to balance the tension between COVID risks and vaccine surprises. The implication is near term economic weakness with medium term economic strength in places like the Heading into 2021 countries will recover at different rates and this will be reflected in currency movements, especially as interest rate differentials around the world have collapsed. The lower valuation on assets outside of the U.S. should also fuel capital flows into other regions creating U.S. dollar depreciation. Structural forces from rising fiscal and current account deficit should add to the weight on the U.S. dollar. This week’s chart looks at the past two dollar declines from their peaks in 1985 and 2002. In these instances the unwinding of dollar strength lasted many years, but the majority of he decline happened early on. Compare this to the peak in the U.S. dollar index this year, and it appears we are only at the state of a period of prolonged weakness in the greenback.
U.S. Dollar cycles last many years
Trade weighted U.S. dollar index, rebased to 100 at peak
JPMorgan Global Research Enhanced Index Equity Fund
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