Market Update from the Global Asset Allocation team – May 2020
In April, sentiment was reinvigorated and risky assets got some much-needed reprieve after the worst meltdown since the global financial crisis. Investors welcomed some tentative signs that the COVID global infection curve may be flattening, which sparked discussions about re-opening the economy. Meanwhile, unprecedented support measures unleashed by both monetary and fiscal authorities also emboldened the risk-on trade and propelled equities higher during the month. At the same time, investors were largely unphased by the raft of grim economic and corporate earnings results that have revealed the extent of the virus-induced economic destruction. As a result, caution is warranted after the historic rebound given both lofty valuations and the lack of visibility on the path forward.
Global equity markets made an impressive comeback in April, with MSCI’s gauge of world equities jumping 11% in its best month since 2011. Regionally speaking, gains were widespread across the globe. The S&P 500 led the global charge and ended the month with its biggest monthly gain since 1987. The S&P/TSX followed closely behind as the previously hard-hit resource sectors made a notable rebound during the month. The risk-on mood also spread to overseas markets, with equities in the international developed and emerging market space joining the monthly advance – albeit to a lesser extent.