Equity market trends: between hope and fear
The equity markets rose in the last few weeks, but without much conviction, and the investor sentimentinvestor sentiment turned sour towards the end of the month. On the positive side, economic figures pointed at a relatively strong recovery of economic activity following the economic contraction linked to Covid-19, reports about progress in the development of a vaccine against the coronavirus, and the agreement on the long-term European budget and the corona recovery fund. But due to the lack of progress in the negotiations for a new round of federal coronavirus stimulus in the US, the increasing tensions between the US and China, and signs based on 'high-frequency' data of weaker momentum in the economic recovery caused by the flare-up of corona infections, the equity markets closed on a negative note.
Despite the good news from Europe, European equities did not outperform (in local currency). A less favorable earnings seasonearnings season and the more expensive euro were negative factors. Chinese equities reported a clear upward trend. In general, the emerging markets emerging markets had a positive performance and constituted the best performing region last month.
In the US, growth stocks - with technology in the lead - again registered a strong performance, despite a temporary weakness in the second half of the month when cyclical stockscyclical stocks outperformed. Due to the strong quarterly results of tech giants like Apple, Amazon, and Facebook, the technology sector's outperformance continued. The five heavyweight stocks (all technology or related) jointly represent over 20% of the market capitalization of the S&P500. Consequently, the price development of those five equities has a significant impact on the S&P500 index.