The strong investment outcomes in April and May sit in sharp contrast to the extremely weak economic data that is beginning to emerge. The US unemployment rate has soared to 14.7%, with more than 40 million Americans filing new unemployment claims in the last two and a half months. The US economy shrank by 4.8% in the March quarter and business sentiment and consumer confidence are at their lowest points since the Global Financial Crisis.

Australian unemployment indicators have not been as stark as most other global economies, primarily due to the impacts of the Government’s JobKeeper and Jobseeker initiatives. The official unemployment rate in April rose from 5.2% to 6.2%. However, almost 600,000 jobs were lost between March and April, and if the percentage of people looking for work had not decreased, the unemployment rate would have risen to 9.6%. It’s now almost certain that the Australian economy will enter its first recession in almost 30 years during the course of 2020.

Of course, investors are well-aware of all these facts, so asset prices already reflect expectations that the remainder of 2020 will be very tough. But investment markets also seem to be assuming that we will see a strong recovery beyond 2020, and that economic activity will pick up rapidly once lockdowns are removed.

Of course, it’s impossible to know whether this will be the case or not. A lot will depend on whether the spread of the coronavirus accelerates as restrictions are eased, whether hospitals have sufficient capacity to care for people who become ill, and probably most importantly, whether a cure or vaccine is discovered.

Thanks once again for all of your questions. Please keep them coming by sending them to the email address on your screen, and I’ll make sure I address them in an upcoming video.