Weekly Market Insight

Latest Economic & Market Update 19th August 2020

19th August 2020

Good afternoon, it is August 19th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • S&P500 reaches all-time high.
  • Draghi warns that debt must be used wisely.
  • Fears over whether US Postal System can handle volume of votes.

The S&P500 climbed 0.23% yesterday to close at an all-time high of $3,389.78. The S&P500 is now up 51.5% since lows on 23rd March. The Nasdaq closed 0.73% higher led by Amazon which gained 4.09% and the Dow Jones closed -0.24% lower. In Europe, the Stoxx Europe 600 fell -0.56%. The dollar spot index fell -0.62% to its lowest level since May 2017 and gold climbed back above the $2,000 level increasing 0.8%.

Due to the pandemic, government debt levels have been rapidly increasing causing concern for investors, especially regarding weaker economies. Yesterday, in his first speech since he stepped down as ECB President in 2019, Mario Draghi warned that debt levels will be high for a long time. To fully recover from the crisis he stated that growing government debt should be used for productive purposes, as the rapidly increasing levels of debt will be paid by the younger generations today. These productive purposes include spending the debt on young people, and research and innovation to equip them with the means to pay it back. His argument was that low interest rates do not necessarily mean that the debt is sustainable and that it depends on the quality of debt. He warned that if the perception of the quality of debt declines, it would jeopardise employment, investment and consumption.

Leading up to the much anticipated US presidential election in November, there has been debate over how Americans will cast their votes. Due to the pandemic, the usual voting system is being questioned in order to prevent mass gatherings and further spread of the coronavirus. The proposed method is a mail-in ballot system which Trump has been very critical of, claiming it is subject to fraud and that votes will not be counted due to the time it will take for delivery of mail. Donald Trump had also threatened to deprive funding to the US post office which would be vital for postal voting. The postal system has also warned that it might not be able to process votes in time. Postmaster General, Louis DeJoy, who was a donor to the Trump campaign, will be in front of the House Committee next week following the postal service’s warning that votes won’t be delivered. Democrats have been pushing for funding for the postal service as it is considered vital to handle the large volume of mail that is expected.

Best & Worst Performers of Large Cap US Stocks on Tuesday
Click the image to enlarge

Global Market Update
(as at close of markets 18/08/2020)