If the stock market's sharp volatility in March came as a shock, the subsequent recovery has been far more surprising.
It wasn’t hard to understand why share prices plummeted as the world went into lockdown to slow the spread of Covid-19, but the rebound is harder to explain. It has been described as the most hated rally in history, and is probably the least expected.
Investors now fear being sucked into a recovery only for share prices to crash again as the world tips into recession. So why is it happening and can it continue?
Rising unemployment is a real risk to the economy, as it hits demand and consumption, but this will only make itself felt in the third quarter of this year.
You may not be able to comprehend this rally, but the longer it lasts the harder it is to ignore. Global stocks flew again on Friday, after US non-farm payroll data showed 2.5 million jobs being created in May, instead of the anticipated 7.5 million loss.
That astonishing figure still leaves US unemployment at 13.3 per cent, while Bank of America suggests it could be as high as 21.6 per cent, but investors were in no mood to quibble and bought more shares.
Fawad Razaqzada, market analyst at ThinkMarkets, says non-farm payroll data “absolutely smashed expectations” as virtually nobody had expected a positive number. “This suggests the economy is turning around faster than most people expected.”
The S&P 500 is now up more than 40 per cent from its March lows, while Asian markets hit a three-month high and shares in the UK and Europe rose strongly as well.
Oil was up in anticipation of increased demand with Brent crude topping $42 a barrel, while safe haven gold fell below $1,700 an ounce as investors embraced risk instead.
Markets got a further rocket from the European Central Bank (ECB), which increased its Pandemic Emergency Purchase Programme (PEPP) by €600 billion (Dh2.48 trillion), lifting total ECB stimulus to €1.35 trillion, while the German government agreed to a €130bn fiscal stimulus package.
The US is lining up another $1tn (Dh3.67tn) of stimulus for June, and this wall of money is the real reason markets have decoupled from the real economy.
In today’s “risk-on” world investors are screwing up their courage and going bargain-hunting in oversold sectors such as airlines, hotels and car manufacturers, while selling off safe havens such as the US dollar and gold.
Chris Beauchamp, chief market analyst at online trading platform IG, says the US economy is back with a bang: "Canadian employment activity surged too, suggesting a V-shaped recover."
When shares dip, investors snap them up, because "they clearly think the recovery will be much swifter than originally feared,” he says.
The big worry is that the US Federal Reserve may scale back its stimulus in response. “That might be the one thing that can halt this raging stock market,” Mr Beauchamp adds.
Private investors will be astonished to hear endless talk about a raging stock market, given that the world is still hurtling into the fastest ever recession, with US gross domestic product predicted to shrink by anything from 5 per cent to 30 per cent in the second quarter, depending on whose figures you believe.
Jeremy Gatto, multi-asset investment manager at global asset manager Unigestion, says the unprecedented stimulus will see the Fed's balance sheet soar beyond $7tn and could ultimately total half the country's GDP, making the coronavirus shock short lived. “Our indicators suggest the worst is likely to be behind us,” he adds.
Investors are sitting on high levels of cash, and will be keen to invest in the recovery. Unigestion is now “overweight” on global equities as it expects them to recover faster than other asset classes as the world picks itself up after the pandemic.
The rally has also vindicated those who advised investors to resist the urge to sell shares in the crash, but take the opportunity to buy them at bargain prices instead.
Maurice Gravier, chief investment officer at Emirates NBD, says the rally has been driven by central bank liquidity and rock bottom interest rates, and this is what markets are focused on. “That is why we recommended buying back in March the stocks we sold in February.”
He says investors were "collectively underinvested” after the crash, which is one reason they hate the rally. “The recovery can last as long as we have incremental good news on the economy, support from central banks, and a pool of capitulating investors.”
Mr Gravier warns this will not last forever as “valuations are elevated, and the recent broadening of the rally, from typical pandemic plays like healthcare and technology to more cyclical segments, indicates much higher expectations for the economy".
The worry is that share prices now look "priced for perfection” when plenty could still go wrong. "The summer could be volatile,” Mr Gravier adds.
Zainab Kufaishi, head of Middle East and Africa at fund manager Invesco, also cautions against getting swept away by the rally, as Covid-19 is not beaten yet.
She suggests there is still value in this market with share prices trading at "reasonable multiples”, but warns the outlook for company earnings and dividends is weak. “Investors must remain diversified and invested for the long term.”
Obvious dangers include a second wave of the pandemic, the ongoing US-China trade war and social unrest as unemployment soars, although again, markets are ignoring all these factors right now.
All that matters is the stimulus, that investors believe will flow into stock markets and potentially drive them beyond pre-pandemic highs.
Some companies will inevitably go bust, though, so choose your stocks carefully. Another concern is inflation.
Steen Jakobsen, chief economist at Saxo Bank, says total liquidity and fiscal stimulus is now larger than global GDP. "This is creating a market where too much money is chasing too few assets.”
He warns we have yet to see the full effects of rising employment, due to government-funded furloughs and universal income schemes in the US and Europe.
Markets tend to act in advance of the real economy, as investors gaze to the future. “In 2009, the true impact on jobs came nine months after the stock market low," says Mr Jakobsen. "Rising unemployment is a real risk to the economy, as it hits demand and consumption, but will only make itself felt in the third quarter of this year.”
Investors must therefore brace themselves for another shock as "we might have seen the stock market low, but we have not felt even 20 per cent of the real economic impact", Mr Jakobsen says.
Markets also have to factor in uncertainty over the forthcoming US Presidential election, to be held on November 3. “If the EU fails to deliver on its much-hyped NextGeneration recovery plan, that will also hit growth,” Mr Jakobsen says.
Saxo Bank is nonetheless “overweight” on European shares, which it expects to rise faster than US stocks from here.
As ever, stock market movements are impossible to call. Today’s astonishing recovery has proved that once again.
Investors will be feeling under pressure to join in the fun, but they should tread carefully as the fastest part of the rally may have passed and markets may slow from here. Old investment principles apply, even in the current madness: do not put all your eggs in one basket and only invest money for the long term.
Investors may loathe this rally but Mr Beauchamp says they would have to be brave to bet against it, as economic data improves while stimulus programmes remain in place. “Those expecting a further downturn in stocks will continue to beat their heads against these two pillars,” he says.
The real danger will come when people stop hating this rally, and allow themselves to love it instead.
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
%3Cp%3E%3Cstrong%3EFixtures%3C%2Fstrong%3E%3Cbr%3E%3Cbr%3ESaturday%2C%20May%2028%2C%20United%20States%20v%20Scotland%3Cbr%3ESunday%2C%20May%2029%2C%20United%20States%20v%20Scotland%3Cbr%3ETuesday%2C%20May%2031%2C%20UAE%20v%20Scotland%3Cbr%3EWednesday%2C%20June%201%2C%20UAE%20v%20United%20States%3Cbr%3EFriday%2C%20June%203%2C%20UAE%20v%20Scotland%3Cbr%3ESaturday%2C%20June%204%2C%20UAE%20v%20United%20States%3Cbr%3E%3Cbr%3E%3Cstrong%3EUAE%20squad%3A%20%3C%2Fstrong%3EAhmed%20Raza%20(captain)%2C%20Chirag%20Suri%2C%20Muhammad%20Waseem%2C%20Vriitya%20Aravind%2C%20CP%20Rizwan%2C%20Basil%20Hameed%2C%20Rohan%20Mustafa%2C%20Kashif%20Daud%2C%20Karthik%20Meiyappan%2C%20Zahoor%20Khan%2C%20Junaid%20Siddique%2C%20Alishan%20Sharafu%2C%20Akif%20Raja%2C%20Rahul%20Bhatia%3Cbr%3E%3Cbr%3E%3Cstrong%3ETable%3C%2Fstrong%3E%3Cbr%3E1.%20Oman%2032%2019%2011%2040%20%2B0.156%3Cbr%3E2.%20Scotland%2016%2011%203%2024%20%2B0.574%3Cbr%3E3.%20UAE%2018%2010%206%2022%20%2B0.22%3Cbr%3E4.%20Namibia%2014%207%207%2014%20%2B0.096%3Cbr%3E5.%20United%20States%2016%207%209%2014%20-0.229%3Cbr%3E6.%20Nepal%2012%206%206%2012%20%2B0.113%3Cbr%3E7.%20Papua%20New%20Guinea%2020%201%2019%202%20-0.856%3C%2Fp%3E%0A
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
The years Ramadan fell in May
F1 drivers' standings
1. Lewis Hamilton, Mercedes 281
2. Sebastian Vettel, Ferrari 247
3. Valtteri Bottas, Mercedes 222
4. Daniel Ricciardo, Red Bull 177
5. Kimi Raikkonen, Ferrari 138
6. Max Verstappen, Red Bull 93
7. Sergio Perez, Force India 86
8. Esteban Ocon, Force India 56
What is the Supreme Petroleum Council?
The Abu Dhabi Supreme Petroleum Council was established in 1988 and is the highest governing body in Abu Dhabi’s oil and gas industry. The council formulates, oversees and executes the emirate’s petroleum-related policies. It also approves the allocation of capital spending across state-owned Adnoc’s upstream, downstream and midstream operations and functions as the company’s board of directors. The SPC’s mandate is also required for auctioning oil and gas concessions in Abu Dhabi and for awarding blocks to international oil companies. The council is chaired by Sheikh Khalifa, the President and Ruler of Abu Dhabi while Sheikh Mohamed bin Zayed, Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces, is the vice chairman.
Killing of Qassem Suleimani
Coal Black Mornings
Brett Anderson
Little Brown Book Group
England Test squad
Joe Root (captain), Moeen Ali, James Anderson, Jonny Bairstow (wicketkeeper), Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Dawid Malan, Jamie Porter, Adil Rashid, Ben Stokes.
BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Killing of Qassem Suleimani
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
VEZEETA PROFILE
Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
Funding: $22.6 million (as of September 2018)
Investors: Technology Development Fund, Silicon Badia, Beco Capital, Vostok New Ventures, Endeavour Catalyst, Crescent Enterprises’ CE-Ventures, Saudi Technology Ventures and IFC
UAE currency: the story behind the money in your pockets
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
UAE currency: the story behind the money in your pockets
What is Bitcoin?
Bitcoin is the most popular virtual currency in the world. It was created in 2009 as a new way of paying for things that would not be subject to central banks that are capable of devaluing currency. A Bitcoin itself is essentially a line of computer code. It's signed digitally when it goes from one owner to another. There are sustainability concerns around the cryptocurrency, which stem from the process of "mining" that is central to its existence.
The "miners" use computers to make complex calculations that verify transactions in Bitcoin. This uses a tremendous amount of energy via computers and server farms all over the world, which has given rise to concerns about the amount of fossil fuel-dependent electricity used to power the computers.
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
PREMIER LEAGUE FIXTURES
Saturday (UAE kick-off times)
Watford v Leicester City (3.30pm)
Brighton v Arsenal (6pm)
West Ham v Wolves (8.30pm)
Bournemouth v Crystal Palace (10.45pm)
Sunday
Newcastle United v Sheffield United (5pm)
Aston Villa v Chelsea (7.15pm)
Everton v Liverpool (10pm)
Monday
Manchester City v Burnley (11pm)
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
The struggle is on for active managers
David Einhorn closed out 2018 with his biggest annual loss ever for the 22-year-old Greenlight Capital.
The firm’s main hedge fund fell 9 per cent in December, extending this year’s decline to 34 percent, according to an investor update viewed by Bloomberg.
Greenlight posted some of the industry’s best returns in its early years, but has stumbled since losing more than 20 per cent in 2015.
Other value-investing managers have also struggled, as a decade of historically low interest rates and the rise of passive investing and quant trading pushed growth stocks past their inexpensive brethren. Three Bays Capital and SPO Partners & Co., which sought to make wagers on undervalued stocks, closed in 2018. Mr Einhorn has repeatedly expressed his frustration with the poor performance this year, while remaining steadfast in his commitment to value investing.
Greenlight, which posted gains only in May and October, underperformed both the broader market and its peers in 2018. The S&P 500 Index dropped 4.4 per cent, including dividends, while the HFRX Global Hedge Fund Index, an early indicator of industry performance, fell 7 per cent through December. 28.
At the start of the year, Greenlight managed $6.3 billion in assets, according to a regulatory filing. By May, the firm was down to $5.5bn.
UAE currency: the story behind the money in your pockets
The specs
Engine: 6.2-litre supercharged V8
Power: 712hp at 6,100rpm
Torque: 881Nm at 4,800rpm
Transmission: 8-speed auto
Fuel consumption: 19.6 l/100km
Price: Dh380,000
On sale: now
Day 3, Abu Dhabi Test: At a glance
Moment of the day Just three balls remained in an exhausting day for Sri Lanka’s bowlers when they were afforded some belated cheer. Nuwan Pradeep, unrewarded in 15 overs to that point, let slip a seemingly innocuous delivery down the legside. Babar Azam feathered it behind, and Niroshan Dickwella dived to make a fine catch.
Stat of the day - 2.56 Shan Masood and Sami Aslam are the 16th opening partnership Pakistan have had in Tests in the past five years. That turnover at the top of the order – a new pair every 2.56 Test matches on average – is by far the fastest rate among the leading Test sides. Masood and Aslam put on 114 in their first alliance in Abu Dhabi.
The verdict Even by the normal standards of Test cricket in the UAE, this has been slow going. Pakistan’s run-rate of 2.38 per over is the lowest they have managed in a Test match in this country. With just 14 wickets having fallen in three days so far, it is difficult to see 26 dropping to bring about a result over the next two.
The biog
Title: General Practitioner with a speciality in cardiology
Previous jobs: Worked in well-known hospitals Jaslok and Breach Candy in Mumbai, India
Education: Medical degree from the Government Medical College in Nagpur
How it all began: opened his first clinic in Ajman in 1993
Family: a 90-year-old mother, wife and two daughters
Remembers a time when medicines from India were purchased per kilo
The Uefa Awards winners
Uefa Men's Player of the Year: Virgil van Dijk (Liverpool)
Uefa Women's Player of the Year: Lucy Bronze (Lyon)
Best players of the 2018/19 Uefa Champions League
Goalkeeper: Alisson (Liverpool)
Defender: Virgil van Dijk (Liverpool)
Midfielder: Frenkie de Jong (Ajax)
Forward: Lionel Messi (Barcelona)
Uefa President's Award: Eric Cantona
UAE-based players
Goodlands Riders: Jamshaid Butt, Ali Abid, JD Mahesh, Vibhor Shahi, Faizan Asif, Nadeem Rahim
Rose Hill Warriors: Faraz Sheikh, Ashok Kumar, Thabreez Ali, Janaka Chathuranga, Muzammil Afridi, Ameer Hamza
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
More on Quran memorisation:
The specs
Engine: 2.4-litre 4-cylinder
Transmission: CVT auto
Power: 181bhp
Torque: 244Nm
Price: Dh122,900
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
Brief scores:
Toss: India, opted to field
Australia 158-4 (17 ov)
Maxwell 46, Lynn 37; Kuldeep 2-24
India 169-7 (17 ov)
Dhawan 76, Karthik 30; Zampa 2-22
Result: Australia won by 4 runs by D/L method
DC%20League%20of%20Super-Pets
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More from Rashmee Roshan Lall
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
The specs: 2018 Mercedes-Benz GLA
Price, base / as tested Dh150,900 / Dh173,600
Engine 2.0L inline four-cylinder
Transmission Seven-speed automatic
Power 211hp @ 5,500rpm
Torque 350Nm @ 1,200rpm
Fuel economy, combined 6.4L / 100km
Key Points
- Protests against President Omar Al Bashir enter their sixth day
- Reports of President Bashir's resignation and arrests of senior government officials
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Brief scores:
Liverpool 3
Mane 24', Shaqiri 73', 80'
Manchester United 1
Lingard 33'
Man of the Match: Fabinho (Liverpool)
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