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Russia has had its fair share of market-moving news this year. Normally, the dispute with Saudi Arabia over oil production and President Putin’s announcement he would reset his term limits would take center stage—yet both have been overshadowed by the dual threats of COVID-19 and the corresponding pressure on oil demand. The economy has predictably struggled, with GDP down 9.6% YOY in Q2, while personal incomes fell 8.0%. Predictably, the ruble has also weakened relative to both the euro and USD—likely a byproduct of not only relative economic weakness but also the oil price collapse.

While the market has responded as we might expect (the MSCI Russia Index is down 22.5% YTD through July in USD terms), Russia is nevertheless still near the middle of the EM pack. It trails countries which have rebounded sharply, such as China and Taiwan, while leading harder-hit compatriots Brazil, Turkey, Hungary and Greece.

As COVID-19 hit and economies shuttered, long-planned IPOs and mergers slowed to a halt around the globe. German chemical firm Atotech, Russian oil giant Sibur, China’s 58 Home and the US’s Airbnb—to name a few—all delayed or halted IPO efforts in March and April. The same was true for M&A, where banks, financial firms and other parts of the market rethought agreed upon deals. M&A globally dropped nearly 50% through the first two quarters of 2020 compared to 2019, while IPO activity fell a more modest 6.8%.                             

None of this is surprising: M&A and IPO activity are likely a decent proxy for sentiment—with participants’ appetite waning as the macro backdrop’s favorability declines. On the flip side, then, it can potentially provide early insight into how quickly sentiment is rebounding. And we may now be seeing some sign of life in certain markets.

Seven months after the first COVID-19-related lockdowns, the economic impact is starting to manifest in the numbers. The EU, one of the hardest hit regions, expects an 8.3% contraction in GDP in 2020. The decline’s potential depth, coupled with decisions countries made during the 2008-2009 global recession, has elicited yet more creative tactics from the EU to attempt to stem a longer-term pullback—the latest of which is a large stimulus package. The €750bn deal, passed in July, still requires approval from individual parliaments, but it could alter how the EU operates moving forward.

There is frequent debate among market participants about which style factors will be in favor in the future: growth, value, momentum, active, passive, etc. While we do not possess the ability to pinpoint the timing of when one style may be in favor over another, we believe the key element in determining the future path of a share price over the duration of an economic cycle is highly dependent on knowing which way profits are headed.

The likelihood of a second trade deal this year with China appears to have materially faded—if it’s not off the table altogether. President Trump recently relayed he isn’t currently focused on  a phase-two deal. To be fair, a phase-two deal may have already been dead in the water for 2020, given the next round of negotiations was intended to aim at some of the bigger bones of contention between the US and China.  Then, too, Beijing officials have long stated their preference for a wait-and-see approach to ongoing negotiations—pending the US’s November election outcome. But now, it seems an even longer-term delay is possible—with potentially significant global ramifications.

The Consumer Price Index (CPI), which has declined for three straight months and is up just 0.1% over the past year, paints a picture of stagnant inflation. But ask any pit master about meat prices this summer, and they’ll point to some noticeable price surges. Meanwhile, gasoline has seldom been cheaper. Of course, any summer travel plans were probably canceled due to the pandemic. And that’s not necessarily a trivial point—because, while headline inflation numbers always mask some important facts about what’s happening with prices in the components, the pandemic’s rapid effects on consumption patterns may be altering some of these nuances in more fundamental ways.

In June, Brexit hit a rather inauspicious milestone, marking the four-year anniversary of the vote to split from the European Union but with little to show for it practically: While the UK has separated in spirit, it remains economically linked to the EU. However, with the UK Cabinet Office confirming that EU trade talks would not extend through next year, the breakup now has a firm date. What remains less clear is how trade will flow between the two regions moving forward.

The Federal Reserve concluded its June meeting, and the results were more dovish than anticipated as 10-year US Treasury yields retreated toward their all-time lows. That the Fed could even appear more dovish after its recent historic liquidity interventions may seem surprising, especially since some of those polices seem to be working (or at least seem not to be doing major near-term harm). Equity markets have erased most corona crisis losses, the latest employment data are shockingly positive and consumers are rushing back to stores given the opportunity. Financial markets are stable, and valuations are rising. The real economy is mending. Everything is looking up! So why is the Fed so glum?

Memorial Day marks the unofficial start of summer and a key moment for the US in its journey through the COVID-19 pandemic: All 50 states have begun—to varying degrees—easing COVID-19 related restrictions.

As restrictions on movement ease, we will start to get a handle on the answer to one very important question: What shape will the US economic recovery take? 

As markets have bounced off what has proven at least a near-term bottom on March 23, many have commented on narrowing breadth—i.e., market leadership among a decreasing number of stocks. Specifically, many noted the bounce was largely driven by the big tech stocks—particularly those commonly known as the FANG stocks (Facebook, Amazon, Netflix and Google, with some adding Microsoft and Apple and rendering the acronym unpronounceable). It’s worth noting that not all of those names are classified as technology companies from a GICS sector perspective: Facebook, Netflix and Google (Alphabet) all fall in the communication services sector, while Amazon is considered discretionary and Microsoft is the only “true” technology company.

Nevertheless, sector returns—in the US and overseas—tell a slightly different story from a tech(/communication services/discretionary)-led bounce.