Wow, that was a good quarter wasn’t it! The S&P closed +1.54% (+19.9% for the quarter), which makes Q2 the best quarter since 1998. I was 4!  Granted, this is a truly unique situation we find ourselves in which makes it hard to call Q3. So let’s perhaps look for clues in history.  All 8 quarters +15% or more since 1945 have been followed by another robust one (with an average +9.5% gain). It doesn’t feel from today’s action that that is anything like possible but we’ll see (puts note in diary for end Sept).

Well let’s focus on how Q2 has done rather than how H1 has done. A much stronger second quarter after the horrors of Q1 leaves us hopeful for more of the same going forward. The S&P on track for its best Q2 since the 1930’s. You’d not have suggested that as likely as we started April. Volumes are understandably mostly higher across the board and macro data is helping those looking for some window dressing (Chinese PMIs beating expectations) but they’re leaving it late at the moment with most indices down just shy of 1%. Maybe yesterday’s late move was enough for most.

Quiet start to the week for most markets with all EU indices trading well below their 20-day AVATs. Feels like investors have taken the day to organise their weekend plans for the 4th of July (celebrating freedom not just in America this year).  Americans will celebrate Independence Day while Brits will celebrate that pubs are finally open – hurray! US closed on Friday and it does feel as though we’re going to be calm.

Looking at the photos of Bournemouth beach late last night, it was hard not to draw the comparison between the beachgoers and the overcrowded positioning of ‘Robinhood’ traders at the minute. Despite countless warnings, thousands flocked to the shoreline in the sweltering sun to claim a patch, a little piece for themselves. High risk, high return I guess but just like with those consensual robinhood names, it feels like it is only a matter of time before the risk manifest themselves into something ugly.

While some of the themes remain the same (Covid headlines back on the scary side of things) there is always something interesting out there. Two that caught my eye today are placings / rights issues and volumes vs the market moves.

So what do you do when things are getting a bit hairy on the Covid front and the world is laughing at your Tulsa moment?  You reignite the tariff war. Headlines out this morning have dominated the newswires and that’s presumably exactly what the administration wanted to happen (I looked back to the last time we mentioned tariffs and it was in February – those glorious days when Covid was “just another type of flu”). Markets have reacted to the “new” uncertainty accordingly and we’ve been lower all day. Volumes not huge though so feels like more of a markdown than anything too dramatic.

A better day all round today with finally plenty to talk about at both the macro and the micro level. Let’s start with the macro and worth noting the Navarro comments (China/US trade deal being “over”) which saw a 500 points drop in the Dow futures before the denial which saw a sharp rally. By the time Europe was open things had settled and investors focussed instead on the various PMI data for the Eurozone. These can be summed up as “headlines strong, detail a bit more of a concern”. We’ve had France and the UK nudge back into expansionary territory. Germany and the Eurozone still below 50 at the headline level but a lot better in May than they were in April. The devil in the detail though and jobs are still being cut on balance (manufacturing especially), inflows of new business and orders still negative, prices still falling. Underlying demand remains very subdued. Furlough schemes masking a lot of the employment pain. So less bad for sure but too soon to get too carried away.

Quiet start of the week and nothing on the macro/corporate side is particularly grabbing investors’ attention. We had Trump failing at his first campaign rally over the weekend (he’s now looking at curbing employment-based visas after that ), noise on the stimulus front (Andrew Bailey suggesting that the BoE should reduce its balance sheet before even considering rising rates – a little bit alarming), US/China relations are not improving much and virus cases continue to rise across the globe (both ongoing).

34803 QUOTE OF THE DAY “Infection rates are rapidly falling, we have protected the NHS and, thanks to the hard work of millions in our health and social care services, we are getting the country back on her feet” Health Secretary Matt Hancock as UK Covid-19 alert level moves from 4 to 3….Step by step! […]

Another lacklustre session with volumes low (down 15-20% vs yesterday’s already subdued levels) as investors again tussle with what will decide the direction for a pretty directionless market. There had been hope that the BoE might help give some excitement on a dull day but everything there pretty much bang in line with expectations. With most indices sitting almost exactly where they were 10 days ago you can see why a lot of people are staying on the sidelines at the moment trying to ignore the market noise. Quarter end expiries tomorrow might help volume but it’s looking like a quiet afternoon ahead.