Interactive Investor

Market snapshot: Covid, the Fed and US tech

23rd September 2020 08:13

Richard Hunter from interactive investor


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Our head of markets issues an update on the slew of events influencing market direction today. 

Markets have generally stemmed the declines of recent trading sessions, although any relief could be short-lived given overarching concerns which have not gone away.

The potential for Covid-19 to wreak further economic damage was brought into sharp focus as the UK announced further restrictive measures. In the US, deteriorating relations with China and political distractions add to an economy which is still being hampered by the effects of the virus.

Indeed, comments from the Federal Reserve pointed to the strength of the economic recovery seen so far, but also noted – again - that further fiscal stimulus would be required to maintain this momentum. While there were strong economic numbers announced yesterday in the form of existing home sales, unemployment remains a thorny issue, particularly given the political backdrop as the Presidential election campaign gathers pace. 

Big tech also saw something of a relief rally, with (NASDAQ:AMZN) in particular seeing the benefit of a broker upgrade, taking its share price to a level of up 69% in the year to date. The Nasdaq is now ahead by 22% in the year to date, with investors contemplating whether fresh lockdowns being announced around the globe will lead to a repeat of the previous demand which the sector previously enjoyed at the height of the pandemic.

In the UK, attempts to foil a second wave of the pandemic piles additional pressure on several already beleaguered sectors which had shown some signs of a tentative recovery. Hospitality, leisure, tourism and the banks will all come under the spotlight once more as the moves by the UK government threaten to choke recovery prospects.

The additional concerns of a spike in unemployment after the end of the furlough scheme, as well as increasingly fraught discussions between the UK and the EU, beg the question of whether more stimulus is required, or even possible. The previously coordinated package of fiscal and monetary stimulus from the government and the Bank of England was well-received and led to some economic success, and it will become apparent in the coming months whether there is appetite, or indeed the wherewithal, to provide further injections.

In the meantime, the FTSE 100 index remains down 22% in the year to date, despite some sustained recent weakness in sterling given the UK’s dampened economic outlook. Investors continue to search for value amid a backdrop of widespread uncertainty, but for the time being the UK’s premier index remains off the radar.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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