Surprisingly strong recovery

During the month as a whole, the US S&P 500 Index rose 2.0 per cent measured in USD, while the European Stoxx 600 Index increased by 3.1 per cent measured in EUR and the Nordic VINX Index climbed 1.6 per cent measured in NOK. During the same period, the Oslo Stock Exchange (OSEBX) fell slightly, by 0.2 per cent.

Fresh outbreaks, but no derailment

As expected, following a period in which various economies were reopened, we saw signs of fresh outbreaks in June. Attention is particularly being paid to some US states as well as to Beijing in China. Measures have already been implemented here, including slower reopening. Future measures will probably be local rather than national, quite simply due to the costs involved. This is also supported by the dramatically improved preparedness of the health sector. So, for the time being, there is no reason to expect that fresh local outbreaks will derail the economic recovery.

The recovery is surprising

The speed of the global economic recovery is unexpectedly fast. In the US, the Citi Surprise Index contains more positive surprises than ever before. This trend can also be seen in the eurozone, where the manufacturing barometers have been better than predicted. At the same time, the estimates vary widely. For example, US third-quarter GDP growth is expected to produce an annualised rate of between -2 and +45 per cent. The consensus for the third quarter is +20 per cent, following an expected fall of -35 per cent in the second quarter. For the eurozone, the consensus is correspondingly +35 per cent in the third quarter, following an expected fall of -50 per cent in the second quarter.

US election

Only a short while ago, Trump was the clear favourite to win the election. Then came the handling of COVID-19, higher unemployment and protests against police violence and racism. Now, four months before the balloting, Biden is the favourite. Naturally, a lot can happen before the polls open. We have both the last US election and Brexit fresh in our minds. As regards economic policy, the consensus is that in the short term it is slightly negative if Biden wins. In the long term, the picture is more balanced. A lot of this is linked to the sharp increase in US national debt as a result of both tax cuts and coronavirus rescue packages.

The road ahead …

Provided the spread of COVID-19 does not spiral out of control while various societies are returning to normal after the lockdown, we expect investors to remain positive. That is good news for the stock markets and equity funds.

"Let's just be smart this time. I'm looking for smart"
Joe Biden