Market Update – 25th August 2020.

25th August 2020

We thought we would be having a quiet start to the week as there was little in the way of economic data yesterday (24 August 2020), as most of the data readings are being released later on in the week.

However, global equity markets lit up yesterday following signs of an easing in US/China tensions, vaccine hopes and news that Apple was reopening more of its stores in the US (the company has become a good proxy for the spread of coronavirus – and so store reopenings are a clear sign that the new infection rate is slowing).

In addition to news that the US FDA (Food and Drug Administration) cleared a coronavirus treatment involving blood plasma donated by people who have already recovered from coronavirus, Donald Trump was reported to want to fast-track some coronavirus vaccines to help slow its spread – which would clearly help allow the US economy to fully reopen and speed up its economic recovery.

Equity markets were also buoyed by speculation that the Fed Chair, Jay Powell, will talk about a new policy framework that will allow the Fed to move towards an average inflation rate target (thus allowing US inflation to temporarily rise above its current 2% target if there had been a period of slower inflation) when he speaks at a virtual Jackson Hole conference on Thursday (27 August 2020).

As a result, the Dow Jones closed up nearly 380 points, or 1.35%, while the S&P 500 index climbed 1%.  In the UK, the FTSE-100 ended the day just over 100 points higher, or 1.71% and is up a further 25 points as we write this morning.

Investment Management