Market Update

While the clamor caused by the resurgence of coronavirus cases and the ongoing US election may seem overwhelming, it hasn't hindered the strong upward movement of global equity markets throughout the week, as demonstrated in the accompanying table.
In our mid-week update on Wednesday, we noted that despite the disappointment caused by President Donald Trump's tweet on Tuesday, October 6, 2020, announcing a halt to stimulus negotiations until after the US Presidential election, we believed that this development wouldn't fundamentally alter the situation. The likelihood of pre-election stimulus had already appeared slim, but ultimately, post-election, stimulus measures are expected to be provided to support American households and businesses affected by the coronavirus outbreak and associated lockdowns, regardless of the election outcome.
Fortunately, our perspective was not unique, and the resulting market sell-off proved short-lived.
Although the current US Presidential election often feels more like a referendum on Donald Trump than a typical choice between a Republican (Donald Trump) and a Democrat (Joe Biden), equity market sentiment was boosted by polls indicating Joe Biden's lead over Donald Trump was growing.
While the long-term implications of a victory by either Donald Trump or Joe Biden for equity markets remain uncertain, in the short term, a Democrat victory is likely to lead to a larger fiscal stimulus package than the already substantial $2 trillion+ package under negotiation.
Market sentiment was further bolstered by the weekly US jobless claims data, which revealed an impressive 1 million drop in continuing claims, bringing the total number of Americans claiming unemployment benefits down to 11 million. At its peak in May, this figure was nearly 25 million. While there is still a long road ahead, the significant and broad-based decline across most US states was encouraging.
Additionally, the release of minutes from the last US Fed monetary policy meeting held on September 16, 2020, indicated that the central bank's economic forecasts were predicated on the assumption of significant fiscal stimulus being provided in Q4. This suggests that the Fed is now inclined to take a more aggressive approach in supporting the economy with additional monetary policy stimulus.
In the UK, the headline-grabbing 2.1% GDP growth reading for August, while slower than July's 6.4%, needs to be considered in context. This data is backward-looking, and the rapid economic rebound seen in June and July was expected to be unsustainable as the economy started reopening and recovering in mid-May.
Looking ahead to the upcoming week, there are several key data points on the horizon, including UK employment data (unemployment rate and weekly earnings), US CPI inflation, US Empire State Manufacturing Survey, US retail sales, US jobless claims, the University of Michigan Consumer Sentiment Index, and Chinese import/export data. These data releases will play a crucial role in shaping market dynamics in the days ahead.