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Market Commentary - June 20th 2020

Investor sentiment has shifted back in favour of more defensive and economically insulated investments. Positive sentiment has waned in the last two weeks; as a growing consensus on the likelihood of a sharp rebound in economic activity has given way to a re-emergence of Covid-19 cases across the globe, particularly in the US. This has provided a reality check for markets and has raised question marks over a quick economic recovery markets are currently pricing in.

Market sentiment has also been affected by the ongoing rhetoric which has emerged from the White House with regard to US / China relations as well as those with the EU. The regulation of US technology companies in the EU has attracted significant investor attention. Voting polls suggest an increasing likelihood of a change in Presidential leadership in the coming election. This is something we will monitor closely in the run up to November.

Recent economic data has broadly continued to support hopes of an economic recovery; manufacturing PMIs in Europe and the US showed sequential improvement, while higher US durable goods orders (+16% from April) and lower inventories continue to evidence a return of demand. US unemployment data continues to build an element of macroeconomic risk, as a further 1.5m individuals applied for jobless benefits in the past week. The IMF revised its global growth expectations for 2020 to -4.9% and the Federal Reserve moved to limit US bank dividend pay-outs and share buybacks in an effort to shore up reserve capital. The Bank of England subtly shifted its stance to favour a reversal of asset purchases over a normalisation of interest rates, as the central bank looks to build an economic exit strategy.

Elsewhere, the NASDAQ index (which includes mostly technology companies) has achieved circa 15.5% outperformance this year (vs the S&P 500). As the number of Covid-19 cases continue to rise in the US, haven assets have done well; the US 10-year Treasury yield has fallen (and so value of bonds has risen), while the price of gold sits at an 8-year high, up by 16.3% in the year to date.

We remain positioned in high conviction ideas, while maintaining relatively elevated cash balances. We remain comfortable with the exposures of our protective assets, with higher cash balances an acknowledgment of the risks which surround equity valuations and the outlook for short-term earnings.

James Hambro & Partners LLP is a Limited Liability Partnership incorporated in England and Wales under the Limited Liability Partnerships Act 2000 under Partnership No: OC350134. James Hambro & Partners LLP is authorised & regulated by the Financial Conduct Authority. Registered office: 45 Pall Mall, London, SW1Y 5JG. A full list of partners is available at the Partnership’s Registered Office.

Opinions and views expressed are personal and subject to change. No representation or warranty, express or implied, is made or given by or on behalf of the Firm or its partners or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this document, and no responsibility or liability is accepted for any such information or opinions (but so that nothing in this paragraph shall exclude liability for any representation or warranty made fraudulently). The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies. You should be aware that past performance is not a reliable indicator of future results. Tax benefits may vary as a result of statutory changes and their value will depend on individual circumstances.


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Kingswood, Kingswood Group and Kingswood Institutional are trading names of KW Wealth Planning Limited (Companies House Number: 01265376) regulated by the Financial Conduct Authority (Firm Reference Number: 114694) and KW Investment Management Limited (Companies House Number: 06931664) regulated by the Financial Conduct Authority (Firm Reference Number: 506600) with a registered office at 13 Austin Friars London EC2N 2HE. KW Investment Management Limited is also regulated in South Africa by the Financial Sector Conduct Authority (Firm Reference Number: 46775).

Both companies are wholly owned subsidiaries of Kingswood Holdings Limited which is incorporated in Guernsey (registered number: 42316) and has its registered office at Oak House, Hirzel Street, St Peter Port, Guernsey GY1 3RH.

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