May 2020 Market Update

It’s May, and the economy (and the world) are still not back to business as usual. The good news? April said goodbye to March’s extreme market swings and governments and central banks continued to roll out new financial relief packages.

As always through this update, we’ll aim to give you a snapshot view of what’s happening, how investments are performing and what this all means for you.

So, what happened in the markets last month?

• In April we saw global markets start to slowly regain footing after March’s market drop.
  • Better than expected corporate quarterly earnings, especially from tech heavyweights including Amazon and Microsoft, boosted investor morale.
  • Financial relief packages, from governments and central banks globally, continued to roll out. The U.K. and U.S. both introduced programmes targeted at keeping small to mid-sized businesses afloat.
  • European countries, and several American states, started to reduce lockdown measures and put plans in place to get people back to work.

• Mid-month the Organization of the Petroleum Exporting Countries (OPEC) came to a historic deal to reduce the output of oil by 10 million barrels a day from May to June.

And how are investments performing?

After March’s drop sent economic shockwaves through markets, April has been a month of modest recovery for equity indexes globally. U.S. stocks saw their biggest monthly rally since 1987 with the S&P gaining 16.22%, while the FTSE All World Index saw its best month since 2001.

At Wealthsimple, our portfolios had a very strong month thanks to the rise in equity markets. That doesn’t mean your overall returns may not be down. Portfolios are still below the levels that we saw before the drop in March but we built them knowing that there would be downturns along the way. And they are proving to be in a strong position to capture any rebounds, which is important for any long-term investor (like yourself).

• This month's best performer? The GBP Hedged North American investment was up 17.98%. The pound strengthened against the dollar over the month of April helping our hedged overseas investments outpace their unhedged counterparts (a deeper dive on hedging here).
• This month's worst performer? The UK Gilts, which were up 1.61%. Traditional ‘safe haven’ investments, like gilts and bonds, underperformed this month as investors looked to buy equities after March’s drop. This is exactly what we should expect in a month that favoured equities and shows how important diversification is. When one type of asset is down, another is bound to be up. And having different assets perform at different times ultimately helps you grow your money in the long run.

Lastly, what does all this mean for me and my money?

No one can predict what will happen next in the age of COVID-19. What we do know is that the best short-term scenario is that economic activity rebounds as governments are able to lift lockdown measures so people can return back to their normal lifestyles sooner rather than later. But what we should all remain focused on is working towards a positive health outcome.

Markets can do strange things while they’re waiting to see what will happen and we should anticipate some ongoing uncertainty in the coming months. The smartest thing to do? Stay focused on your long-term investment plan and stick to it. This is what the majority of our clients did last month and it paid off in April as investors were rewarded for staying the course.

That’s all for now but if you have any questions you can always reach out to support@wealthsimple.com or book a call with a member of our investment team here.

Take care,

James

Investment Adviser

Wealthsimple