Market Update

The provided table illustrates that most major equity markets experienced a modest gain during a relatively calm week.
This achievement is noteworthy considering the escalating tensions between the US and China and the surge in coronavirus cases in America, the world's largest economy. This rise in cases has the potential to transition the expected economic recovery from a sharp 'V' shape to a more gradual 'Nike Swoosh' shape, indicating a robust recovery, albeit at a slightly slower pace.
The market's ability to ascend amid increasing COVID-19 cases and one of the most profound economic downturns in history highlights the growing disparity between the trajectories of virus cases and deaths. This phenomenon, combined with the effectiveness of extraordinary government and central bank stimulus efforts, has created a disconnect in the financial landscape.
Furthermore, positive test results for the potential new drug, Remdesivir, offered a glimmer of hope. Data from a study covering a diverse group of 1,063 patients demonstrated the medication's ability to reduce mortality rates and shorten the duration of illness.
However, caution is paramount. The return to 'normalcy' is expected to be turbulent, with progress often accompanied by setbacks. This reality demands a prudent approach. Hence, with your long-term interests in mind, we prioritize risk management and capital preservation alongside investment performance and returns. Despite the current upward trend in equity markets, we remain mindful of existing economic and political risks. Consequently, we maintain a defensive stance, holding a slightly higher than usual level of cash, including liquidity funds.
A notable economic release this week was the US weekly jobless claims report on Thursday, July 9, 2020, which indicated a positive decline in both initial and continuing claims.
Looking ahead, the upcoming week promises increased activity. The European Central Bank (ECB) and the Bank of Canada are set for monetary policy meetings. Key highlights include UK Consumer Price Index (CPI) inflation, May's GDP figures, and employment data encompassing the unemployment rate and weekly earnings. In the US, attention will be on CPI inflation, retail sales, industrial production, the Fed’s Beige Book, and the University of Michigan Consumer Sentiment index. Eurozone industrial production and Chinese retail sales and industrial production data are also anticipated.
However, specific data releases are poised to significantly influence equity market trends next week. The US Empire State Manufacturing Survey on Wednesday, July 15, 2020, will be closely watched, followed by the release of Chinese Q2 GDP and US weekly jobless data on Thursday, July 16, 2020.