Global Market Overview – July 2020

In July, we saw a major shift in the government’s guidance with more encouragement for workers to return to the office. While the government is looking to get the economy back to full-speed, research by 94 of Britain’s biggest employers indicates that many businesses are taking their time in re-opening offices while some are struggling to convince workers it is safe to return.

While new cases continue to rise worldwide, death rates are falling partly due to a better understanding of the virus. Research also suggests that a far wider number of people may have contracted the virus, but antibodies may have defeated the virus before entering the bloodstream. If correct, this could mean no second wave in those areas that were worst effected initially, like London.

We therefore believe the stage could be set for a sharp economic rally through the end of 2020 and into 2021. Particularly if continued stimulus from central banks can provide stability to economies in order to keep unemployment low and consumer demand high.

Equities were broadly positive in July, although the FTSE 100 experienced negative returns owing somewhat to the strength of sterling. The S&P 500 gained 5.2% through the month while emerging market equities were the strongest performer returning 8.4%.

Core views

Coronavirus – the Hammer, but only a short Dance? The Hammer stage of tackling COVID-19 (mass lockdowns) across the world’s economies has finished. Governments are reluctant to move back into lockdown, and recent scientific research suggests that the Hammer may not be needed again. Medical services across the world are better equipped to deal with outbreaks, and the development of a vaccine cannot be ruled out within the next 18 months.

The economic recovery could set records for speed and size. The world has never seen as much coordinated stimulus as in the past five months. A rapid V-shaped economic recovery is a higher likelihood than it seemed a few months ago. The authorities are not going to allow another 2008/09 crash if they can possibly prevent it.

Lagging assets should do well. We are starting to see opportunities appear in the equity market. Much of the equity rally has been concentrated in technology stocks – and understandably so, given their resilience to coronavirus, and their balance sheet strength. In a more conventional economic recovery, though, other parts of the market could start to rally too; whether cyclical equities, European dividends or more specialised areas of credit.

Bond aren’t as defensive anymore. Low interest rates aren’t new. But most developed markets have just increased their borrowing by a staggering amount.


Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.


July 2020

With thanks to Seven Investment Management LLP for their views and market thoughts.
RiverPeak Wealth Limited

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