Insights

Top News:

7/06: Global equity markets took cues from China, where a bullish editorial in state-run media sent the Shanghai Composite Index soaring 5.7%.  Separately, June’s ISM Non-Manufacturing Index, reflective of the all-important service sector, saw the first expansion in activity since March. 

 

7/07: Novavax announced a $1.6 billion investment from the federal government, joining seven other candidates in the public-private partnership to produce a vaccine.

 

7/08: Registering yet another single-day high of newly confirmed Covid-19 cases, the U.S. has reported about 60K new cases on average over the past 5 days, itself also a record.

 

7/09: While trending lower, the weekly jobless claims report remains disheartening; for the 16^th week in a row, new applications for benefits exceeded 1 million.

 

7/10: The Producer Price Index unexpectedly declined in June owing to ongoing meek demand.  Nevertheless, investors cheered as Gilead released more encouraging data on its investigational antiviral.

 

Heard on the Street:

The tug-of-war between governmental stimulus, re-opening progress, vaccine hope and market valuations continues to grip analysts:

“While the pace of reopening will slow, there is little appetite for the sort of extreme lockdown measures that were implemented in March. The U.S. Congress will ultimately extend fiscal support for households and firms. Around the world, both fiscal and monetary policy will remain highly accommodative, which should provide a supportive backdrop for stocks.”

— Peter Berezin, chief global strategist at BCA Research as quoted by MarketWatch on 7/06/2020

 

“Barring a big shock, it is improbable to think of a trading range for the S&P 500 in the 2,500-3,000 area, but more likely in the 2,700-3,200 vicinity as monetary policy will be in place to prevent a 20% or greater decline… We envision volatility for equities as good news is being priced in and problems are being overlooked.”

— Tobias Levkovich, Citi’s chief U.S. equity strategist said, according to MarketWatch on 7/07/2020

 

Longer Game:

In its efforts to prop up market confidence and ensure smooth flowing of credit, the Federal Reserve has increased its balance sheet to $7 trillion, three times the size at the height of the Great Recession.  This unprecedented ballooning may precipitate: 1) displacement of the U.S. dollar as the world’s reserve currency (Ray Dalio of Bridgewater Associates), and 2) distortions in how assets are valued (Dalio and Jeffrey Gundlach of DoubLine Capital).

 

Bonus:

Lancet published a large-scale study in Spain, which showed herd immunity through natural infection was “unachievable” as a strategy against Covid-19.