01273765960 mail@nlfm.co.uk

US market storms ahead

10th September 2020


The main US stock market index hit several new all-time highs in August.

US market storms ahead

So far, the US has had a difficult 2020:

  • Its performance in the battle against Covid-19 has been widely criticised. In the first part of August the country was still experiencing around 50,000 new cases each day.
  • In the second quarter of the year, the economy shrank at an annualised rate of 32.9% (i.e. 9.5% across the quarter), following a 5.0% shrinkage (1.3%) in the first quarter.
  • Unemployment in July was running at 10.2%.
  • A political logjam in Congress has prevented a second round of financial stimulus, the first round having expired at the end of July. 

Despite these headwinds, the main US stock market index, the S&P 500, reached several new highs in August, having risen more than 50% from the low that it plumbed on 23 March 2020 as the pandemic took hold.

On the face of it, the new Wall Street high looks seriously out of sync with life on the ground in Main Street, USA. However, there is some logic in the market’s performance:

  • Wall Street is not Main Street. In particular, the performance of the S&P 500 has been driven by a quintet of huge multinational technology companies – Apple, Microsoft, Amazon, Facebook and Alphabet (Google’s holding company). Together, these five companies account for just under a quarter of the value of the index.
  • Interest rates have fallen. US interest rates have dropped sharply since the start of the year; the 10-year government bonds now offer an annual return of around 0.7%. As interest rates fall, in theory share prices should rise because a low discount rate is applied to value future profits. For income seekers, the S&P 500’s dividend yield of around 1.72% could seem relatively attractive.
  • The market looks forward, not back. Economic data is about the past, but investment is about the future. Investors are considering how US companies’ profits will develop from here. As lockdowns and other restrictions are eased, an inbuilt recovery is expected. 

Similar arguments apply in other markets: the best investors, like the best drivers, look and think ahead.

The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

To discuss the impact further, why not speak to one of our team on 01273 765960 or email mail@nlfm.co.uk


Chartered Financial Planner | North Laine Financial Management Limited | Brighton

This is the industry’s gold standard for firms of financial planners. When you use a Chartered firm you are dealing with proven professionals. 
Only the UK’s premier financial planning firms qualify for Chartered status. 

North Laine Financial Management Ltd is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 446522 http://www.fca.org.uk/register.

North Laine Financial Management Ltd Registered Address: West Wing, 47 Old Steine, Brighton, BN1 1NW. Registered in England & Wales, No. 5072423.

Neither North Laine Financial Management Ltd nor its representatives can be held responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The Financial Conduct Authority does not regulate National Savings or some forms of mortgage, tax planning, taxation and trust advice, offshore investments or school fees planning.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

The information contained within this site is subject to the UK regulatory regime and is therefore targeted primarily at consumers based in the UK.

Please read our Privacy Statement before completing any enquiry form or before sending an email to us.