Weekly Wrap-Up

Last Week In Markets: May 04 - May 08, 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including easing COVID-19 restrictions, US unemployment figures and Chinese trade data.

Global markets rose as many countries continued easing COVID-19-related economic lockdowns. While recent weeks have looked promising, it is impossible to say with certainty that stocks’ rise since March 23 is the start of a new bull market and not a bear market rally. These things are often only clear with several months’ hindsight. However, we are optimistic about the medium to longer term as markets eventually recover. Stocks typically turn higher before economic data do, making huge strides before there is evidence of a recession’s end. Capturing these returns is necessary to achieving market-like returns over time—particularly since early gains compound throughout the bull market.

In the US, California, New York and other states shared plans to begin re-opening parts of their economies. At this point, most states have either begun easing restrictions on individuals and businesses or unveiled plans to do so in coming weeks. In terms of US economic data, most headlines focused on the April unemployment rate, which spiked to 14.7%, below the consensus forecast of 16%. April nonfarm payrolls plunged by 20,500,000 in April, also slightly less than expected. Job losses were heavily concentrated in harder-hit industries such as leisure and hospitality. However, counterintuitive as it may seem, almost every market recovery begins with a high unemployment rate. Stocks don’t require an all-clear sign and typically rise well before any improvements in economic or employment data. For more, please see our 5/8/2020 commentary, “April’s Astounding Employment Report Confirms What We All Expected.” March exports and imports fell 9.6% m/m and 6.2% m/m, respectively. The final April Markit Services Purchasing Managers’ Index (PMI) came in at 26.7, decreasing slightly from the preliminary 27.0 reading. The April ISM Non-Manufacturing PMI fell to 41.8, beating the 37.5 consensus forecast. (Readings below 50 indicate contraction.) For stocks, what’s most important is how long the current economic contraction actually lasts.

In the eurozone, the final April Markit Services PMI was revised up to 12.0 from the initial reading of 11.7, while the final Markit Manufacturing PMI came in at 33.4—slightly lower than the preliminary estimate of 33.6. March retail sales decreased 9.2% y/y, missing estimates. In the UK, the final April Markit/CIPS Services PMI was revised higher to 13.4 from the initial estimate of 12.3. The April Markit/CIPS Construction PMI dropped to 8.2 from 39.3 in March, well below expectations. On Thursday, the Bank of England left monetary policy unchanged.

In China, the April Caixin Services PMI rose to 44.4, missing estimates. April imports decreased 14.2% y/y, falling more than forecast, while exports increased 3.5% y/y, handily beating expectations. In Japan, the final April Jibun Bank Services PMI came in at 21.5. March household spending fell 6.0% y/y, less than expected.  

The Week Ahead:

The US announces April retail sales, industrial production and inflation figures. The eurozone and UK post March industrial production, trade data and Q1 2020 GDP updates. China releases April retail sales, industrial production and inflation data. Japan announces April bank lending.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.