{"id":547,"date":"2020-06-19T00:38:33","date_gmt":"2020-06-19T00:38:33","guid":{"rendered":"https:\/\/halcyonpw.com.au\/?p=547"},"modified":"2020-08-04T03:30:48","modified_gmt":"2020-08-04T03:30:48","slug":"market-update-why-have-equities-rallied-so-much","status":"publish","type":"post","link":"https:\/\/halcyonpw.com.au\/market-update-why-have-equities-rallied-so-much\/","title":{"rendered":"Market Update \u2013 Why have equities rallied so much?"},"content":{"rendered":"\n
Between the 23rd<\/sup> of March and the 8th<\/sup> of June US equities rose 43%, a massive rally. It is not often after this sort of rally that market participants are left scratching their heads in confusion. Consider this context. We are in the middle of the largest economic contraction since the great depression. There is a global pandemic, which, while seemingly under control in Europe, appears to be spreading uncontrollably in many developing markets and never went away in the US. Geopolitical tensions between the US and China are again escalating. The largest global protest movement since the 1960s shows no signs of easing without meaningful policy change. Markets have corrected meaningfully in the past week, as investors redeveloped an appreciation for the issues above. However, they remain well above their trough.<\/p>\n\n\n\n Despite recent volatility, we think the chances of re-entering a bear market are low. For the most part, the rally has been sensible and reflects the following:<\/p>\n\n\n\n While economic data and earnings expectations for the middle of 2020 have been generally horrendous, the picture improves materially the further out your investment horizon shifts. Markets reflect investors\u2019 best estimation of discounted future<\/strong> cash flows and every day that passes is a day closer to that future. Through May and June, we have seen a progressive relaxation of government induced lockdowns across many countries.<\/p>\n\n\n\n The figure to the right shows the change to social distancing restrictions in the two weeks to late May 2020 based on Google mobility data. There has been a meaningful relaxation across most economies.<\/p>\n\n\n\n The figures below this show our Asian and US Growth Barometers. These use statistical analysis to construct real time estimates of economic growth using high frequency data as it becomes available throughout the month.<\/p>\n\n\n\n There are a few key takeaways from these charts.<\/p>\n\n\n\n The Asian Growth Barometer is around two months ahead of the rest of the world in its growth timeline. These economies begun (and relaxed) social distancing restrictions before the rest of the world. Their collapse in economic activity was very quickly followed by a massive rebound in growth. <\/p>\n<\/div>\n\n\n\nForward Looking Markets<\/strong><\/h4>\n\n\n\n