Investor confidence faltered at the end of last month but we think the long-term trend is positive.
July saw generally positive returns, before markets stuttered in the last week in light of Q2 GDP data showing the economic damage caused by coronavirus lockdowns. Most markets still ended the month positive in local currency terms, although the UK and Europe gave back all the gains they’d made in the month up to that point.
We’ve never anticipated the market recovery as being a straight line pointing up, and this kind of reality check in the wake of new data was to be expected. And while the economic data made for grim reading, markets remained broadly resilient against the backdrop of rising infections. The coronavirus pandemic has now moved from being a worrying question mark for investors to a quantifiable, and therefore manageable, event.
It’s also worth remembering that GDP data is backward-looking. Forward-looking measures such as Purchasing Manager Indices, which survey companies about incoming business, suggest that economic activity is returning, and in the longer term we see the economic growth trend as positive.