We saw equity markets struggling to make much progress, not helped by an abundance of awful economic data, failed drug trails and continued volatility in the oil price.
The debate of when to end lockdowns continued apace. There are concerns that an early easing of restrictions could result in a dangerous second spike in infections. This has already happened in Singapore and Northern Japan.
The world is suffering from a glut of oil and the demand slump caused by the Covid-19 crisis means storage capacity is running out. This storage shortage caused WTI futures prices to turn negative for the first time ever. In the absence of more positive economic news or more certainty over the fallout from the Covid-19 pandemic, there appears little upside in the oil price, or the wider commodities space, which highlights the contraction in the global economy.
The US House of Representatives passed a nearly $500bn Coronavirus relief package, pushing the total spending to address the crisis up to nearly $3tn. The relief bill was passed almost unanimously and will be used primarily to fund small businesses and hospitals.
Over the coming months negative data will continue to provide disappointing reading, some of which is already priced into markets. Moving forwards the most important data is unemployment (although a lagging indicator), and company earnings.
In the US, 26 million have filed for unemployment benefit and we know the consumer is an important component of their economy. The number means that more people have lost their work in the last five weeks than the number of jobs created by the US since the financial crisis a decade ago.
Human behavioural biases mean that fear trumps greed and in financial markets downside movements tend to be rapid and violent whilst recovery takes time to build, as after the shock, there are lots of plausible reasons to be cautious.
The data is going to get worse before it gets better, but just as we are looking forward to considering how the lockdown unwinds so markets are looking forward to grasping the size and quantum of the economic impact. The rapid actions of central banks and governments to provide monetary and fiscal stimulus have enabled markets to drift upwards in the near term – however, volatility is likely to remain elevated as the historic data provides plausible reasons for caution.