CIO Monthly View with Will Bartleet, CIO and multi-asset portfolio manager at Pacific Asset Management
Markets continued to move higher in June although volatility returned as COVID-19 infection rates picked up sharply in some US states. Whilst new cases continue to decline in most of Europe, America is much more bifurcated: outbreaks are falling rapidly in the states that were worst affected in March and April, while states such as Texas, California, Florida and Arizona are seeing a rapid increase in new cases.
The re-opening of the global economy continued in June with unemployment falling after the shocking rise in March and April. In the US, the unemployment rate fell from 14.7% to 13.3% as 2.5 million people returned to work. In Europe, the jobless rate is around half that, but a staggering 45 million workers are being kept on payrolls via government programs.
Equity market continued to rise in June with a significant dispersion of returns by region over the month. Emerging markets led the way as China continues to lead the recovery from the effects of the coronavirus on its economy. Japanese stocks were broadly unchanged whilst US equities lagged the world index over the month, with bouts of volatility triggered by concerns over localised outbreaks.
Central banks continued to provide support for bond markets with extensions of existing bond buying programmes. The Federal Reserve followed through on their promise to purchase corporate bonds under their Secondary Market Corporate Credit Facility which had thus far been limited to purchasing ETFs. The ECB announced that they would increase the Pandemic Emergency Purchase Programme by EUR600 billion. Whilst central bank’s commitment to supporting the economy and markets has been unwavering, the news for savers with cash in the bank remained dismal with the Federal Reserve indicating that they would not be increasing interest rates for at least two years, echoing comments from the Bank of England.
Within alternatives, gold continued to move higher, closing in on its all-time high achieved in September 2011. During the month we took advantage of the bounce in global REITS to reduce exposure, where we think the longer-term impact on demand for real estate will weigh on demand for several years.
IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority. The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation in respect of such securities or other financial instruments. Where past performance is shown it refers to the past and should not be seen as an indication of future performance.