July Jobs Report: Better Than Expected, Better Than Feared

Excerpt from Barron's - August 07, 2020

A portion of William Witherell, Ph.D.'s commentary, Why Investors Are Looking at Taiwan, was incorporated into Barron's collective piece, "July Jobs Report: Better Than Expected, Better Than Feared".

This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.

Taiwan’s Prospects Brighten

Cumberland Advisors Market Commentary

Cumberland Advisors
Aug. 5: The Taiwanese economy is benefiting from both its success so far in combating the coronavirus and a $35.9 billion government stimulus program to help offset the headwind from the 4.9% decline projected for the global economy. Consumers started in July to spend government-issued vouchers for consumer goods and tourism, and several weeks ago the government tabled a second supplementary budget for 2020 of $7.13 billion to boost sectors hit by the pandemic. More important than these measures has been the resumption of strong demand for Taiwan’s high-quality telecommunications exports, helped by people around the globe working from home.

Taiwan’s manufacturing downturn in April and May eased in June, with the IHS Markit Taiwan Manufacturing PMI [purchasing managers index] rising to 46.2 from 41.9 in May. In July, the PMI moved into expansion territory at 50.6 with output stabilizing. Supply chains are still under pressure and employment continued to decline. Tourism and aviation have been hard hit....

Looking beyond 2020, Taiwan is well-situated to take advantage of the projected recovery of the global economy and continued outperformance of the technology sector. Its most important export is semiconductors, an industry key to the accelerating development of 5G technology. China, Taiwan’s most important export market, is expected to expand strongly next year.

Taiwan’s stock market has done better than most national markets this year. The iShares MSCI Taiwan ETF (EWR) has recovered from a sharp drop in March and is now up 9.8% year-to-date. In comparison, the iShares MSCI ACWI ex US ETF (ACWX) is still down 6.3%, and the advanced-country ex-US iShares MSCI EAFE ETF (EFA) is down 8.4%. The outperformance of EWT reflects the 54% weight of technology stocks in the ETF, with Taiwan Semiconductor Manufacturing (TSM) accounting for 23.3%.

Read the full collection of commentaries that make up this -article at Barron's (Paywall): https://www.barrons.com/articles/july-jobs-report-better-than-expected-better-than-feared-51596843004

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