Sanlam Private Wealth Morning Digest 08 April 2020

Local Markets

The bulls remained in charge on the JSE, as the local market extended gains in line with global financial markets. Investor sentiment towards risky assets seem to have improved, as the latest data relating to Covid-19 suggests that the spread of the virus might have peaked. The markets are pricing in that economies around the world will start opening for business and the impact will be less severe than initially predicted, as the spread slows. This will however still need to be proven, while investors remain hopeful. The JSE All-Share closed 2.72% higher, with local stocks benefitting from the stronger rand. SA`s weekly bond auction was well over-subscribed across the board, highlighting the country`s capacity to still raise funds under the label of sub-investment grade. The bid-to-cover ratio, a proxy for investor demand, was at 3.65 times for the current 10Y. As investor sentiment improved, the 10Y strengthened to below 11%, gaining 36bps on the day.

American Markets

Wall Street experienced a rollercoaster day, which saw markets trade strongly higher before closing in the red. The Dow gave up its 900 points or nearly 4.1% gain towards the end of trading, as it closed 0.1% in the negative. Both the S&P 500 and Nasdaq composite jumped more than 3% earlier in the day, before following the Dow lower to close 0.2% and 0.3% in the red respectively. The major indices have rallied about 20% from their March 23rd lows, with some pundits now claiming the market is getting ahead of itself. Goldman Sachs’ chief equity strategist, David Kostin: “Risk to the downside is greater than the opportunity to the upside from this point where we stand today,”