Weekly Market Insight

Latest Economic & Market Update 5th June 2020

05th June 2020

Good afternoon, it is 5th June 2020 and here is your economic and market update from BlackBee. Today we focus on:

  • Graph of the Week: US stocks significantly overvalued
  • ECB to increase Bond Buying programme
  • Transport blocks add more tension to US/China relations

Graph of the Week: US stocks significantly overvalued

The Wilshire 5000 Total Market Index measures the performance of all actively listed US stocks. When compared against GDP, it provides insight into whether  US stocks are undervalued (a ratio under 1) or overvalued (a ratio over 1). Since the 23rd of March, where the Wilshire Index hit a low of 22,463.62USD, the Index has risen over 41%. Advance/decline lines compare the number of stocks that had a positive return each day to the number of stocks that had a negative return. Although tech stocks were considered to be driving the rally, advance/decline lines in all the S&P 500, Nasdaq, Dow Jones and Russell 3000 indices have been increasing, indicating that more stocks have been delivering positive returns than negative returns. Heavily hit sectors such as travel and retail have not been making up much of the rally. The rally has been driven by immediate FED and US Government action to the crisis resulting in investors having a risk on tone and hoping there will be a swift pickup in economic activity as economies reopen. In recent days, the extent of the rally has left many investors more cautious as to how far it can go.

At a glance:

  • The ECB announced on Tuesday that it will increase its bond buying programme by €600 billion. Christine Lagarde stated that severe job losses and high uncertainty has resulted in consumer spending and investment plummeting. The pandemic emergency purchasing programme is now totalling just shy of €1.4 trillion.
  • The US Transport Department announced it will block any passenger flights from China on June 16th unless they allow US carriers to resume service and fly to China. This new issue threatens to add more tension to US and China relations.
  • Claims for unemployment benefits in the US reached 1.9 million last week showing continuing damage to the labour market and bringing the total number of unemployment claims to 43 million.

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

Global Market Update
(as at close of markets 04/06/2020)