The month of May saw economies around the world starting to re-open their economies with China leading the charge. The stock market is optimistic that countries such as South Korea and China seems to be able to achieve some level of normalcy while the numbers of new COVID-19 patients remains controllable. The China's manufacturing index also showed encouraging signs of expansion which is an indication of a recovering economy. Meanwhile, western economies started to re-open, despite some of the have not seen a significant decline in the number of COVID-19 infection as pressure to stave off a deep recession forced the hands of some political leaders.
The stock market is heartened by the return to normalcy and many Asian stock markets started to recover more strongly in the month of May. In US, the tech heavy NASDAQ lead the charge in recovery as many tech companies saw their fortunes jumped as the world embraces the digital world in the midst of the pandemic while the main index which comprises of a more diversified range of stocks lagged behind due to the different impacts the pandemic has, on different industry. Thanks to the number of tech companies in US, the US stock market soared ahead as compared to its peers, with Europe performing the worst.
Impact of Riots and Protests on the Stock Market
Protests in Hong Kong re-ignited as a result of the Bejing government determined to push through a National Security Law in Hong Kong, as it has lost it patience with the Hong Kong government to re-enact a similar law after it has failed in the past.
Over at US, protests and looting rocked major cities in US as a result of the killing of an unarmed African American, George Floyd by the police department. It ignited an once in lifetime protest around US, demanding justice and race equality for colored Americans. Looters took advantage of the distraction by the police force in trying to control the protests and looted major retail stores which includes electronic stores such as Apple and high end boutiques like Hermes.
The stock market in both Hong Kong and US are not affected by the social unrest with the primary influence still impacted by the recovery from the COVID-19 pandemic. I believe that the riot will start to die down in time to come and will not have long term impact on the economy as compared to COVID-19.
Portfolio Performance and Strategy
Our strategy to tactically overweight on US equities at the peak of the COVID-19 pandemic has paid off handsomely as the portfolio has recovered all of the losses from the pandemic recession. Stock markets around the world are still at 10%-20% away from the top and this gives us an indication of how much more profit there is to be made should the economies recover to normal in the next few months. The stock market recovery continues to gather steam as countries are now much better prepared for the second wave of the pandemic. I am looking to continue to increase our equities holdings in the near future as there are still room for profit even though the future remains uncertain as I believe that the stock market will be supported by a combination of fiscal and monetary policies around the world and putting a bottom to another sharp down slide in the markets. This will create another set of problems as governments will need to find ways to pay for financial support they have given out during the crisis and this may create another financial crisis down the road.. but that is a story for another day and we should focus on making the best of the current situation.
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