The short-term pull-back in stock prices last week on the back of persistent virus concerns in the US and elsewhere shows the market remains jittery despite the massive run-up in prices since late March. May data from China showed a relatively fast rebound on the supply side of the economy, but a much slower take-off in consumption, suggesting a ‘reverse square root’ kind of recovery for economies rather than the ‘v’-shaped one markets have been pricing. We therefore maintain our cautious tactical stance on equities. Further short-term challenges lie ahead such as Q2 corporate earnings, although upcoming vaccine trials could diminish fears about a ‘second wave’ of the pandemic in the coming weeks.
The sharp decline in markets on Thursday was