[Market Madness] Edition 0074
Sunday Recap
At a crossroads
Well folks, I hope you all enjoyed a relaxing weekend. The major news sites appeared to show that it was all quiet on the financial front this weekend. Other major corporates have made the move to pause social media advertising, following the recent wave that centered around boycotting Facebook and other social media platforms in effort to engage in a conversation about changing how we interact with one another online.
Elsewhere, a new storm is brewing between the U.S. and Russia over a scathing NYT report that hit the press on Friday. Some links are provided in the “Quick Takes” for your personal further reading. All I will say is there are serious consequences to come from this, and many bad opinions are coming out between what has been played up to be a positive working relationship between the two leaders. I imagine much more will come from this.
Did you miss the last edition? No worries! Get it right here and catch up on the madness.
Fundamentals
Friday Close:
Dow Jones Industrial Avg: -2.84%
S&P 500: -2.42%
NASDAQ: -2.59%
US 10 YR: 0.647%
Crude OIL: $38.16
Market Madness Portfolio: -1.78%
COVID 19 Global Cases: 10,154,544
Indices Overseas:
FTSE 100: +0.20%
Nikkei 225: +1.13%
Hang Seng: -0.93%
TEDRATE: 0.15
LIBOR (3 month): 0.30600%
Much of the same
As one quarter closes, another opens. This week, we move out of Q2 and into Q3, hoping to see signs of overall improvement. Q2 was a wild ride, with the first half being wrapped up in COVID 19, and now the very tail end is being wrapped up in the virus as well. Between those two times, we saw movements toward recovery, albeit a slow movement. As a result, at least in the short-term outlooks for the new quarter, much is remaining the same.
Many market-participants are realizing — partially because of the new rise in cases, but also because the economic data is not dazzling us like we had anticipated — the road ahead will actually be long and challenging.
What we are continuing to see and expected is variety (the spice of life) across industries. Some industries will snap back because of consumer demand or their ability to embrace flexibility during the height of the pandemic, while other will need more generous hand holding and TLC — and that is okay. Well, it has to be okay because there isn’t much we can do to change it.
The interesting metric that I think we are all anticipating is the Q2 GDP number. A piece out of Deloitte Insights suggests the base case decline will be about 16% between Q1 and Q2. This number is a big deal both what they’re projecting and what the real number comes out to be. It shouldn’t come as any surprise that production and output had been severely crippled during the Q1 and Q2 time frames; as a result, there will be a decline. However, like with everything else we’ve look at to track recovery, it will be in magnitude of numbers relative to expectations and not just the number itself.
Of course, they are also predicting other tracks that GDP could take, as any good economist should. there is the case of a faster recovery (green) and the worst case (light blue) which provide a band for the base case (dark blue) to stay between. What is most frightening to investors and market-participants is that we all truly don’t know where the GDP number will come in. We may have some idea where it can fall between, but the actual is unknown right now. As important, and similarly unknown, will be the market reaction to the number. It all comes down, once again, to expectations.
Additional considerations are starting to be noted regarding the upcoming election and potential for a change of seats both at the White House and in the two chambers. Many traders are suggesting that this ‘risk’ is not fully priced into the market yet, which can give rise to changing price levels as we move closer to November. Given the news break on Friday too about U.S. - Russia happenings, near-term political risk can also shape markets in the upcoming weeks. My new favorite slogan here appears once again, but truly, ‘a lot hangs in the balance’ as we look ahead.
Quick Takes
COVID 19 cases surpass 10 million worldwide. (via CNBC)
The COVID 19 puzzle. (via WSJ, updated)
Microsoft moves to permanently close its retail stores. (via CNBC)
On China’s recovery effort and its global implications. (via CNBC)
New U.S. benchmark for crude to rival WTI. (via CNBC)
Russia’s secret offering of bounties for U.S. soldier deaths at Afghan Military hands. (via NYT and via RollingStone)
Follow-up video detailing the NYT article listed above for the Russian bounties. (via MSNBC)
Reader’s Corner
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