Insights

 

WuRevue Week Ending 12/04/2020

 

Top News:

11/30: China’s economic rebound continued unabated in November, even as the US seeks to further sanction Chinese state-affiliated enterprises. In a first, Moderna applied for both US/EU’s emergency approval of its vaccine. The window to conclude Brexit negotiations is narrowing, with fishery rights viewed as a key stumbling block.

 

12/01: US manufacturing accelerated again in November, albeit at a slower pace than the prior month. A bipartisan group of lawmakers unveiled a $908 billion coronavirus relief bill aimed at breaking congressional impasse.  OECD now expects global GDP growth to reflate to its pre-pandemic level by the end of 2021 in a China-led recovery.

 

12/02: UK became the first to authorize emergency use of the vaccine developed jointly by Pfizer and BioNTech.  Biden said he “would not make any immediate moves” to disrupt existing tariffs on or trade deals with China.  Meanwhile, a law to delist non-compliant Chinese companies from US exchanges is expected to be signed.  Democrats appeared open to negotiate on a smaller economic recovery bill.

 

12/03: Optimism from the latest weekly jobless claims data was muzzled as the US surpassed more grim pandemic milestones.  One gauge of the all-important US service sector suggested decelerating growth in November.  The Street was dismayed as Pfizer disclosed its vaccine shipment for this year will be halved due to supply chain issues.

 

12/04:  Coming in below expectations, hiring in the US fell to a seven-month low as pressure mounts for Congress to accelerate revived stimulus talks.  Moderna said its vaccine may confer longer-term level of protection for at least 3 months.

 

 

Heard on the Street:

“So while the equity market may continue on its course of confidence that a soon-to-be-released COVID-19 vaccine will allow global economies to reopen in earnest in 2021, history hints that December’s return may be subpar as stocks catch their breath from their recent post-election sprint.”

— Sam Stovall, chief investment strategist at CFRA, quoted by MarketWatch on 11/30/2020

 

“I think emerging markets are very under owned… We’re actually neutral on China right now, but we’ve upgraded the rest of emerging markets where we do think the valuations are attractive, and there’s more opportunity.”

— Joyce Chang, chair of global research at JP Morgan, in a CNBC interview on 12/3/2020

 

 

Longer Game:

Noting that “the level of interest rates is an increasingly important element to consider when valuing equities,” Robert Shiller believes current market levels may not be as “absurd” as some thought, due to “a potentially protracted period of low interest rates.”

 

Prof. Minxin Pei outlined a roadmap to de-escalating Sino-American tensions.  Such a move is in both countries’ “short-term political interest,” even if longer-term unipolar rivalry appears unavoidable.

 

 

Bonus:

While Chairman Powell warned of the disproportionate economic impact on the least wealthy fifth of the country, Congress continued to dither on a new round of fiscal support.  One policy think tank posits the extension and reinstatement of unemployment benefits through 2021 would add 3.5% to GDP and create 5.1 million jobs.