US – Lockdown took its toll on the economy | Harris Fraser
Insights
15 May, 2020
US – Lockdown took its toll on the economy

After consecutive months of losses, US equities regained foothold despite the ongoing epidemic, recording a strong rebound in April, S&P 500, Dow Jones, and NASDAQ were up 12.68%, 11.08%, and 15.45% respectively over the month.

After consecutive months of losses, US equities regained foothold despite the ongoing epidemic, recording a strong rebound in April, S&P 500, Dow Jones, and NASDAQ were up 12.68%, 11.08%, and 15.45% respectively over the month.

The covid-19 outbreak in the US remains relatively severe, as we continue to see 5 digit new cases daily. That said, the rate of growth has gradually eased over the month, slowing down from the percentage growth in the teens to sub 5%. Recently, more citizens came out to protest against the ‘draconian’ lockdown measures, US president Trump echoed the protestors’ sentiment, calling governors to consider a gradual lift of the said measures.

While lockdown measures might be gradually lifted as the severity of the epidemic eased, it’s still too early to celebrate now, as even in the most optimistic scenario, it would still be highly unlikely for social activities to return to normal before June. Economic indicators also suggest that the recovery is not happening yet, manufacturing and services PMI are setting new lows, consumer confidence is weak, and employment data is still soft. With corporate earnings outlook revised down, the current valuation might be considered relatively expensive, we would not rule out the possibility of a correction in the short term, but the extensive liquidity in the market should still propel the market up in the mid to long term.

 

SP500

 

By Harris Fraser Research Team

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