The week to Tuesday’s close saw equity markets reclaim some of the ground lost recently, with global equities gaining 2.2%. Having led the downturn, US technology shares added 3.2%, pushing the broader US market 2.1% higher. However, the rally was not confined to technology. Leading UK shares added 3.0% and European shares 2.3%, suggesting that investors increasingly favour areas other than the US and technology. This would be consistent with a reversal of behaviour in the first two months of this year when we saw investors reduce exposure to Covid risk in Asia, Europe and the UK, reinvesting in the relative safety of the US but unintentionally driving US equities higher and setting the market up for an even sharper sell-off.
While we may not have a vaccine for Covid yet, the recovery from lockdown continues and with it, changes in spending habits. August’s increase in dining out under the government’s Eat Out to Help Out Scheme modestly reduced demand for supermarket groceries – the opposite effect to the surge in demand they saw when pubs and restaurants were ordered to close.
Similar changes back to normal are taking place in every industry globally which suggests that we should continue to see money flows away from technology and the safe-haven of the US.