Market Commentary - Markets bounce back, but recovery remains fragile

StockFanatic

Publish date: Wed, 11 Mar 2020, 11:28 AM

· Amid a double whammy of the virus crisis and an oil price war, sentiment got a boost from the Trump administration's measures including cutting payroll taxes. With stimulus hope coming to the rescue, most Asian indices look set to extend a relief rally for a second day. The S&P 500 Index surged almost 5%, but futures are starting with a negative bias on Wednesday for details of the stimulus to unfurl.

· President Donald Trump wants a payroll tax holiday through the November election, but the idea has been rejected by Democrats as the White House plan lacks detail. House Speaker Nancy Pelosi said her party is seeking budget estimates before unveiling legislation.

· The US market opened sharply higher yesterday, with the Dow Jones Industrial Average soaring nearly 1,000 points within the first few minutes of the opening bell. Stocks then erased the entirety of their gains before midday, only to charge higher again in the final hours of trading.

· The S&P 500 rose 135.67 points, or 4.9%, to 2882.23. At its lowest point Tuesday, the index was just 0.9% away from ending an 11-year bull market run that overcame issues ranging from a global trade war to the first-ever downgrade of the US's credit rating.

· The Dow industrials, which at one point sat just 0.2% away from a bear market-a 20% drop from a recent high-closed up 1167.14 points, or 4.9%, to 25018.16. The Nasdaq Composite was up 393.58 points, or 5%, to 8344.25.

· Markets will remain skittish as Europe appears to be the new front line of the Covid-19 outbreak with more than 99% of new cases coming from outside China. Cases in Italy topped 10,000 and deaths jumped to 631, while PM Giuseppe Conte called on the ECB to do whatever it takes in the fight against the virus. Controlling the spread in some parts of the US is now beyond containment efforts, the director of the CDC said. Infections surpassed 118,000 worldwide while deaths breached 4,260.

· The clash in the oil market has yet to abate, with Saudi Arabia's Aramco pledging to supply a record 12.3 million barrels a day next month. The hike is more than 25% higher than last month's amount. Moscow responded within minutes, saying it has the ability to boost output by 500,000 barrels a day. That would put the country's production potentially at 11.8 million barrels a day, which is also a record.

· We believe that amid near term volatility and widespread risk aversion, investors should be guided by a clear and deliberate long-term investment strategy, and not the performance of markets in the most recent trading session.

· We continue to recommend that investors build up portfolio resilience through active diversification and portfolio hedges, which can include unit trusts that provide sustainable and regular income regardless of how markets are performing.

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