The state owned China Securities Journal noted that: “In the post COVID-19 world, the economy needs a healthy bull market more than ever” and: “Cultivating a healthy bull market is important for creating new opportunities”. We don’t see this sort of stuff from the FCA very often…

The S&P 500 is marginally ahead having twice dipped back to 3000 in the meantime. Torn, as so frequently at the moment, between a shocking jump in COVID-19 cases in southern US States, quite what the economic damage will eventually prove to be, support from Federal Reserve policy and, more recently, the prospects for a vaccine. Once again, the strength has come from technology, the NASDAQ Composite being up a further 7% and reaching more new highs. Jefferies is pointing out that the world’s three tera-cap ($3 trillion) companies, Apple, Microsoft and Amazon, with the addition of Alphabet (which is almost there), are now worth more than the entire Japanese market.

US Federal Reserve (and the other major central banks) policy remains highly supportive, the ten-year US Treasury yield has edged lower again, to 0.6%, a move that is reflected in the UK and Europe. Credit spreads have also been consolidating but tending tighter (with huge demand for serious issues), also supportive to equity valuations.

We are now entering the corporate reporting season, commencing with the big banks this week, so will learn a lot more over the next few weeks as to how companies are actually faring. Doubtless this will generate lots of individual stock volatility, but it is tempting to think that markets will head for the summer lull quite soon. We have had several weeks now to suffer a serious setback over the ‘second wave’ but it hasn’t happened and, over the short-term, the Fed has actually been able to scale back its support and reduce its balance sheet.

None of us are really any nearer knowing how the pandemic will play out, though we are all becoming ‘experts’ now. It is encouraging to see two separate vaccine trials going well, though these are not yet at scale, but discouraging to see what is happening to daily case numbers in the US and elsewhere. The average age of new cases appears to be lower so we must watch the actual rate of deaths (what an awful thing to be writing).