Insights

Top News:

7/13: Pfizer and BioNTech announced two vaccine candidates have received “fast track” designation from the FDA, bolstering hope that mass production may begin by year-end.

 

7/14: Largely due to higher gasoline prices, the Consumer Price Index rose for the first time in four months in June.  At less than 1%, inflation remains a distant worry, however.

 

7/15: Publishing an interim analysis in The New England Journal of Medicine, Moderna reported its vaccine candidate “elicited robust neutralizing antibody results.” Meanwhile, economic activity increased in almost all districts of the Federal Reserve, yet remained well below pre-pandemic levels, according to the latest Fed Beige Book.

 

7/16: Avoiding a recession, China registered a 2Q GDP growth of 3.2%, driven largely by industrial production despite anemic retail sales.  Indicative of a problematic job recovery, U.S. reported stubbornly elevated continuing jobless claims of 17.34 million.  Separately, retail sales in the U.S. rebounded for a second straight month in June, albeit at a meager annual rate of 0.3%.

 

7/17: According to the University of Michigan’s preliminary July survey, consumer sentiment receded more than expected, in conjunction with the renewed surge in coronavirus cases.

 

 

Heard on the Street:

“The investing challenge may well shift in the months ahead from riding an exceptional wave of liquidity, which lifted virtually all asset prices, to steering through a general correction in prices and complex individual nonpayments… Liquidity-driven rallies are deceptively attractive and tend to result in excessive risk-taking.”

— Mohamed El-Erian of Allianz, in an op-ed in Financial Times on 7/13/2020

 

“There are clear signs that the longer-term damage is beginning to mount, with permanent layoffs beginning to climb, and the flow of workers from employment to unemployment still elevated.  Moreover, absent a vaccine, the need for ongoing physical distancing will prevent a full recovery.”

— Michael Pearce, senior U.S. economist at Capital Economics as quoted by CNBC on 7/16/2020

 

 

Longer Game:

With the US’ formal rejection of China’s maritime claims in the South China Sea, Prof. Minxin Pei of Claremont McKenna College argues the convergence of added pressures may spell a tumultuous period for the world’s second largest economy.

 

Is a regulatory reckoning coming for the Mount Rushmore of Big Tech–Apple, Amazon, Google, Facebook—whose combined market value exceeds $5 trillion?

 

 

Bonus:

According to Bank of America’s monthly survey of 210 institutional investors as of July 9^th, U.S. tech stocks remain the most “crowded trade,” along with added allocations to pharmaceuticals, cash, and commodities.