Markets in a Nutshell - May 2020

Developed market share bourses sustained their late-March V-shaped recovery rally into April, posting double-digit gains. The S&P 500 index in the US achieved its best one-month gain since October 1974. Emerging markets also advanced, led by India and Russia on improved terms of trade.

The markets were responding to coordinated and robust global monetary and fiscal policy interventions and COVID-19 progress. This despite more than 80 countries seeking IMF aid amid the severe economic demand shock.

The US Federal Reserve took further steps to avert economic collapse by providing $2.3 trillion to support households, businesses and local government. This includes $600 billion of credit support to small and mid-sized businesses. Flattening viral curves in the major economies and early indications of progress on potential COVID-19 therapies and easing of lockdowns also helped boost sentiment.

Despite lower market volatility and the global equity rally, developed market bond yields fell as bond investors continued the push into relative safe-havens amid economic uncertainty. The US 10-year also recorded new lows

Oil recovered marginally, but is still under pressure given the 25-30% collapse in near-term demand despite major producers agreeing a 10% supply cut. The WTI oil price went negative for a brief period on a futures-related technicality given almost-full storage facilities in the US.

Leading precious metals miner Wheaton Precious Metals was as major performance contributor in both Foord global funds, driven by increases in gold and silver.
Foord Global Equity Fund delivered alpha, despite a high cash balance. Mesoblast more than doubled after its remestemcel-L treatment achieved meaningful results in treating a small sample of severe COVID-19 patients and progressed to comprehensive trials. 

The Foord International Fund’s S&P 500 hedges detracted in the rapidly rising market. The managers nevertheless retain the portfolio insurance given the continued global economic uncertainty resulting from the ongoing COVID-19 pandemic. There is a high probability that April’s returns were a bear-market rally.