Webinar: Markets vs Economy: Why markets have rebounded sharply despite a grim economic outlook
Endowus Insights

Webinar: Markets vs Economy: Why markets have rebounded sharply despite a grim economic outlook

Updated
June 20, 2022
published
August 28, 2020
.
suited man writing with marker

Despite the COVID-19 pandemic, its resultant economic fallout and the weakening of the global economy and job markets, the stock markets have recovered promptly.

Why has there been such a big divergence between the financial markets and the struggling economy? Will this divergence end in the form of a recovering economy or a stock market correction? How can we navigate markets with the risk of prolonged second and emergent third waves of COVID-19 observed across the world? Will news of emerging vaccines continue to prop up investor sentiment?

Should you diversify your investments in view of uncertainties ahead?

Financial Horse and Sam Rhee, Chairman and CIO of Endowus discussed how to make better financial decisions in these uncertain times.


00:00 Introduction

6:11 Background of the current crisis ?US market demand and fiscal stimulus

18:15 Impact of fiscal stimulus on GDP, in comparison with other crisis

32:02 Impact of quantitative easing (QE) on inflation

42:10 Impact of QE on the strength of the US Dollar and FX risk

50:22 Negative interest rates and bond investments; what about gold?

1:10:54 About Endowus Cash Smart and QnA

Excerpts from the session

Can you share the sentiments of the market before and after COVID-19? (6:57)

The year was expected to be a fantastic year for the equities market from the China US trade deal made in January, and Trump was expected to prop up the stock market for the elections. Things were rosy quite then. Before we know it, everything fell apart in March when the virus started spreading quickly around the world. The US government carried out unlimited QE and the Fed even got the point where it purchased corporate bonds, which is unprecedented. This helped the market to rally very strongly.

Is the fast recovery surprising to you? What are your views about it? (20:55)

As seen from the charts, once the Fed started the QE or any aggressive monetary policy, that usually ends the market crash and the markets start to rally, be it the Great Depression, Global Financial Crisis or the COVID-19 pandemic. The only difference is that this time it happens so quickly. This type of quick and huge response by the Fed is unprecedented. The logical question next is whether there is any sustainable recovery of the economy? Do we see an inflationary or deflationary phase?

Sam: The goal of the Fed's monetary policies is to stop companies and individuals from being bankrupt, to that extent the Fed and many central banks have achieved what they set out to do.

What are your views of USD and SGD in the short- to mid-term? (42:10)

My longer-term view for USD is that it is going to depreciate. In the mid- to longer-term, the Fed will want the USD to depreciate to make US goods and services more competitive. In the short-term, the USD has fallen very quickly and significantly from its peak in March. I am not sure if the USD is oversold at the moment.

Sam: We are not in the business of forecasting short term market movements, but I have a colleague that came up with the term "Dollar Smile". One scenario where the USD will strengthen at the start of financial crisis, when there is a flight to safety. The other scenario is when the US economy is doing well and it will appreciate. Currently there are some questions posed about the viability of USD being the reserve currency of the global economy, and there is some shift to safe haven currencies like Japanese Yen and even Singapore dollars.

<divider><divider>
Investment involves risk. Past performance is not necessarily a guide to future performance or returns. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endow.us Pte. Ltd (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus Pte. Ltd., its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

Investment into collective investment schemes: Please refer to respective funds’ prospectuses for details of the funds, their related fees, charges and risk factors, The listing of units of the fund on a stock exchange does not guarantee a liquid market for the units. Before making an investment decision, you are reminded to refer to the relevant prospectus for specific risk considerations.

For Cash Smart Secure, Cash Smart Enhanced, Cash Smart Ultra: It is not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Investment products are not insured products under the provisions of the Deposit Insurance and Policy Owners Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme. Interest rates are indicative and subject to change at any time.

Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

More on this Tag
suited man writing with marker

Table of Contents