Weekly Market Commentary: 29 July 2020
The last week has seen stock markets move sideways to slightly lower as we have waded through earnings season and company fundamentals are more at the forefront of investors’ minds. Gold, more on that later, has surged to a new all-time high in US dollar terms as governments continue to look to support their fragile economies.
The US Republicans put forward a proposal for another coronavirus stimulus bill worth around one trillion dollars. The plan would see another round of one-off payments of $1,200 to most American adults. Whilst this would clearly be a big stimulus on the US economy, the Democrats and Republicans in the US Congress currently seem far from reaching an agreement.
With only 100 days to go before the US presidential election, talks are tense between the parties.
UK Property market bouncing back
The impact from the Coronavirus is continuing to impact the UK property market; are people looking for another bedroom to turn into a study or for some more outside space? Potentially both, but new information from Rightmove has shown that searches for homes with gardens have doubled in the UK since last year as prospective house buyers place more importance on outdoor space following lockdown.
Homes with south-facing gardens were most in-demand selling more quickly in almost all regions of England, Scotland and Wales, a survey by property website Rightmove found. The study revealed that homes advertised with south-facing outdoor areas sold two days faster and were priced at nearly £23,000 more than those without.
Rightmove said data showed that searches on the website for homes with a garden had increased by more than 100% in June compared to June 2019 with total buyer searches up 56% for the same period.
Gold – Always believe in your soul
The Gold price has been buoyed in 2020. Often seen as a safe haven asset, the precious metal has performed strongly this year against the backdrop of economic uncertainty from the global pandemic.
The price has moved to $1,960 a troy ounce, at the time of writing, which is now higher than the previous high of $1,921 set in September 2011. Importantly, for a UK investor, Gold like all commodities, is priced in US dollars and therefore has been at a sterling price high for a while.
There are a number of positives and negatives in holding Gold within the portfolio. On the positive side; it’s seen as a store of wealth, can behave like a safe-haven asset and is seen as a hedge against inflation. However, from a negative perspective Gold doesn’t pay a dividend and the only way to increase wealth from holding Gold is on the basis that the price increases in value over time.
We are now back to a 9-year high – which highlights the strategy of buying and holding (in dollar terms) may not have worked over the last nine years but could potentially have been a successful strategy for some investors so far in 2020. It’s also incredibly important to look at the supply and demand characteristics – the higher the Gold price the more economically viable for mining projects of extra reserves – therefore increasing the supply and impacting the Gold price.