Global markets have recovered much of their COVID-19 induced losses, as the wild price swings at the height of the market panic have moderated. As of May 28, 2020, the MSCI World Index and S&P 500 have regained roughly 60% and 66% of the losses from their February peaks, respectively.
While stocks will almost certainly be driven primarily by trends in new cases and mortalities related to coronavirus over the near term—as well as potential vaccination and treatment developments—that doesn't mean the pandemic is the only factor to think about if you are actively investing with some portion of your portfolio.
Here are a few key market events to monitor as you attempt to manage a diversified portfolio of investments.
It goes without saying that the primary market mover right now—and in all likelihood over the next several weeks and months—is the pandemic. Key public health data to monitor remain trends in new COVID-19 infection rates (see Bending the coronavirus curve chart) and related mortalities from sources like Johns Hopkins, the Centers for Disease Control, and the World Health Organization.
Investors may want to keep an eye on concerning trends out of regions like South America, where Brazil has seen a resurgence in new COVID-19 cases and is now the 2nd most afflicted country worldwide, as well as the potential for a 2nd wave to hit other countries as governments loosen restrictions.
Economic and earnings reports
The fact that stocks have recouped much of their pandemic losses despite global economies being firmly in recession should reinforce how unique this market is. In addition to the historic monetary and fiscal stimulus implemented by numerous governments around the world, the rebound for stocks may be attributed to an anticipation that economic activity and earnings will recover quickly.
Next twelve months (NTM) earnings per share (EPS) for the S&P 500 plunged to multiyear lows (see Next twelve months earnings per share has nosedived chart), but as the economy has begun to open back up, bullish investors may believe that forward earnings could reverse this sharp downtrend.
Monitoring economic and earnings reports may be particularly important during this phase of the pandemic, to help assess how economies are responding to opening back up. Some of these metrics include, but are not limited to, trends in weekly unemployment claims, consumer sentiment, manufacturing activity, energy demand, and more.
This data can also be supplemented by insights from individual companies in their quarterly earnings reports, press releases, and other announcements. For example, airline operators have been hit extremely hard by a historic drop in air travel. Since March, total air transportation travel in kilometers for revenue passengers is at lows not seen since the late 2000s (see Global air travel has plummeted chart). Individual airline operators might provide useful insights into their expectations for future bookings.
Air traffic is not likely to pick back up significantly over the short term. The United Nations World Tourism Organization expects global tourism to decline 70% this year, as more people are expected to take trips by land rather than on flights. That compares with the previous global crisis that resulted in a 10% to 20% annual decline in global tourism. With that said, air travel passengers' willingness to get back on flights eventually would be one sign that consumer sentiment has improved, with spillover implications for a variety of other industries.
It's easy to forget what "normal" market conditions looked like before the pandemic. Yet it wasn't that long ago that global trade wars were a primary factor moving markets—in addition to underlying earnings for individual companies.
Tensions between the world's 2 largest economies remain, with the US and China still posturing for advantageous trade positions across a range of industries. Moreover, the possibility now exists this relationship could be further complicated by COVID-19. For example, might individual country's trade policies shift in a world where supply chains were so easily disrupted by the novel coronavirus, creating myriad problems, including access to much needed supplies to battle the pandemic? Investors should continue to monitor how nations and businesses may adapt.
Elections and more
Looking a bit further out, there are several elections on the calendar for 2020 that may impact markets. These include the September 2020 legislative election in Hong Kong, where political instability had been a significant concern prior to the COVID-19 outbreak, and the November 2020 US Presidential and Congressional elections.
As always, geopolitical events and other market-shaping developments might add to the seemingly full platter for investors to think about. With that said, coronavirus is almost certainly the predominant factor to shape the stock market for some time as the calendar shifts into summer.