Markets remain unfazed although the second wave epidemic continued to ravage across the country, as the impacts of the ongoing epidemic have already been taken into account. US equities continued the strong performance as markets looked past the covid crisis, the S&P 500, Dow Jones, and NASDAQ gained 5.51%, 2.38%, and 6.82% in July respectively.
Vaccine optimism and stimulus expectations were the 2 main driving forces behind the surging markets. The positive progress in various vaccine developments drove anticipation that the global economy could return to normal at a sooner date than originally expected; additional fiscal stimulus is also expected to give a boost to the somewhat struggling economy. To add on that, US President Donald Trump mentioned that the White House is considering a possible payroll tax suspension, further boosting market optimism.
The gradual recovery of economic indicators, with all major PMIs rising to 50 or above, suggests a potential bottom in the economic downturn. In particular, we have noticed that the earnings forecast for both the tech and healthcare sectors began to rebound after the earlier downward revision. Although there might be slight corrections in the short term with the valuations still on the higher end, with surprisingly good quarterly results and a lifted outlook, we continue to stay bullish on these sectors in the long term.
