Stock markets in Asia and around the world have been rallying in recent days – despite a slew of weak economic data.
At the start of the week, China’s Shanghai Composite Index rose 0.3%, Tokyo’s Nikkei 225 gained 1.4%, Hong Kong’s Hang Seng 1.9%, Seoul’s Kospi was 0.2% higher and Sydney’s S&P/ASX 200 added 1.2%.
Meanwhile, all major European indices also opened higher on Monday and US futures pointed up.
This is all highly unusual at a time when US unemployment is the highest since the Great Depression and most economies have been affected by a hit to supply and demand due to the Covid-19 pandemic.
But these, as we know, are not usual times.
While the stock markets might appear to be out of sync with current economic realities, this is not necessarily the case. Indeed, I believe that they are accurately reflecting both current and future economic landscapes.
A more in-depth analysis of global equities shows that, as always, not all stocks and sectors are rising equally. But they are being driven up in general terms by the “winners” of this new era including technology, pharmaceuticals, biotech, home entertainment and household-name online retailers, among others.
It can be expected that these and other stock market “winners” are also highlighting in real time what a post-pandemic economy will look like.
In many ways, these unprecedented times are encouraging investors to do what we should all be focusing on when making investment decisions, regardless of the situation: looking at long-term earnings potential.
In my opinion, this is, to a large extent, what is happening now, as investors are making judgments on what the sustainable trends of the future are.
They are doing this instead of relying on first-quarter financial results that are arguably less relevant than they might ordinarily be, because they record information from before the pandemic when the world was a different place.
For instance, stock markets indicate that perhaps there will be less demand for commercial office and retail space but more for videoconferencing platforms and streaming services.
Against this backdrop of the economic trends of the future being increasingly defined as we move further more into the new era, it can be reasonably argued that stock markets will continue an upward trajectory in coming weeks.
Good fund managers will be actively helping investors seek out the opportunities and mitigate potential risks as and when they are presented in a decade that is being reshaped more quickly and more dramatically than any other.
Nigel Green founded deVere Group in 2002 from a single office in Hong Kong after discovering a niche market for expatriates in the financial services sector. Since then, it has grown to become one of the largest independent financial advisory organizations in the world with offices and clients across the globe.