[Market Madness] Edition 0079
Step on the Brake
Like I said
Well folks, it looks like investors set their eyes back on COVID 19. Futures were down in the pre-market this morning. Novavax received a $1.6 billion government contract to develop a vaccine for the virus as part of the administration’s ‘operation warp speed.’ The push to a vaccine is very strong currently, as 33 states here in the U.S. are battling increased case numbers, crowding hospitals, and business closures. Nearer to midday, we saw the S&P and NASDAQ turn green, with the Dow Jones lagging behind. The indices continued to flutter up and down. By the end of the day, all the major indices were seeing red, pushed down by investor worries with rising COVID 19 cases.
Elsewhere, we saw the major overseas markets give up some of yesterday’s gains as well. Relations between the U.S. and China and the U.S. and Russia remain tense and are likely to stay this way well into November. Many fund managers are shifting expectations away from the Trump administration as outlooks continue to narrow the odds of a second term, according to Axios. The same survey back in December revealed a very high chance of reelection, but the onset of COVID 19 and it's economic impact have swayed odds in favor of a new administration. The election is still far away, but it is good to see that fund managers are opening their prospects to a change of hands; that way the market is not too spooked in November after the outcome, no matter which way it lands.
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Fundamentals
Tuesday Close:
Dow Jones Industrial Avg: -1.51%
S&P 500: -1.08%
NASDAQ: -0.86%
US 10 YR: 0.639%
Crude OIL: $40.34
Market Madness Portfolio: -0.74%
COVID 19 Global Cases: 11,691,068
Indices Overseas:
FTSE 100: -1.53%
Nikkei 225: -0.44%
Hang Seng: -1.38%
TEDRATE: 0.16
LIBOR (3 month): 0.27650%
Leveling off
A big fear of many economists and market-watchers is approaching: the economic level off. News coming out of the Federal Reserve Bank of Atlanta, which governs the southern states (some of the hardest hit areas by COVID 19), is suggesting that newer data is predicting an economic stall. In terms of business openings and mobility, the data appears to show a leveling off, indicating a plateauing of positive economic movement. The new surges in cases and the need for some state leaders to reinforce shutdowns is leading to an economic flatline for these areas and the economy at large.
“‘Regional data show particular weakness in virus-hit states, where V-shaped recoveries are morphing into Ws,’ Aneta Markowska and Thomas Simons, Jefferies economists, wrote in a note.” (excerpted from article)
Despite the economic leaps forward the U.S. has been making, by reopening businesses and returning folks back to full-time employment, the next big question to come from this data is if it is a momentary pause, or a longer-term trend. That question is still to be answered. Many are revisiting the question about the need for additional stimulus measures like extending the enhanced unemployment benefits, or sending another round of checks to the American people. The fine folks on Capitol Hill are out at recess until the week of July 20, leaving little time for them to act on extending the unemployment program. As we could have guessed, this is a heavily divided issue, right down party lines. Donnie has been rumoring another stimulus check, but many want to see it to believe it. The Atlanta Fed president suggests that although there is guidance out there for long-term economic policy avenues, the ability for the Fed to act and leave an impact will be time sensitive.
The devil lies in the details and the name of the game still is ‘uncertainty.’ As we learn more about the reopening processes that have failed from some states, other can adjust accordingly and try to mitigate a resurgence there. Many interested parties have also called on the WHO to study more into different factors of the virus; we still do not know as much as we need to about the virus in order to take the best precautions. That, like everything else, will only come with time. But with daily records of new cases here in the states and globally, many are starting to ask how much time is there before it is too late? What is too late? These are great questions, and unfortunately, these are questions we do not have the answers to right yet.
Quick Takes
One of Silicon Valley’s oldest startups confidently files for public offering. (via CNBC)
TikTok might get U.S. ban amid rising U.S.-Chinese tensions. (via CNBC)
Global natural gas supply reaching capacity. (via WSJ)
More on those who benefited from PPP loans. (via WSJ)
President of Brazil, Jair Bolsonaro tests positive for COVID 19. (via CNBC)
Reader’s Corner
The reader might enjoy this FT article discussing what happens to boutique M&A firms when business dries up, as it has during COVID 19. Read that here.
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