09042020 :: Friday finance week in review

A partial digest of what we learned:

  • There is still no agreement on further stimulus or implementing safety nets for the general public in the United States. As the Labor Department keeps tinkering with jobless figures and things consequently look rosier than they otherwise might, inertia to pass additional stimulus measures builds. Yes, the unemployment rate has decreased yet again. But “altogether, the number of people getting benefits through eight state and federal programs rose to an unadjusted 29.2 million as of Aug. 15 from 27 million in the prior week.”¹ What’s more, rehiring seems to be slowing to a trickle, and more businesses are telegraphing permanent layoffs unless there is more aid or the economic situation improves.

    Meanwhile, the CDC took it upon itself to try and accomplish what the government is too hamstrung or unwilling to do: confront housing insecurity by banning evictions, in a move to prevent further COVID-19 outbreaks. Landlords, in turn, have made it known more aid is needed to really address the situation.

  • Equities ended the week on a down note, in particular the NASDAQ, after an intense run-up. Is it profit-taking, or nerves, or is the reality setting in that we’re still at the beginning of this pandemic and there is more hardship to come? That said, however, where else is the accumulating “wealth” to go besides equities? They are delivering in ways no other asset is at the moment. It seems more likely than not right now that the rout won’t be prolonged and the summit to new heights will resume, especially with the “Fed put” remaining in place. Precious metals markets enjoy no such backstop, for example.

  • As mentioned a couple of weeks back, S&P 500 price action is the very definition of inflation. There are always only 500 companies. Should one fall from grace, another shall take its place. Indeed, just today, six of corporate America’s household names traded places: online retailer Etsy, semiconductor equipment manufacturer Teradyne, and medical technology firm Catalent were welcomed into the club, replacing tax specialist H&R Block, beauty company Coty, and retailer Kohl’s. Missing from the action was Tesla, disappointing some who believed that they were a shoe-in to the index after meeting various requirements for inclusion. Price action was already heavy in after hours trading in several of these names.

  • Gold prices remain depressed relative to the high reached on August 6, 2020.

  • The Fed’s “Main Street Lending” program is now open to America’s nonprofits. Most of the $600 billion available in the program remains untapped.

  • COVID-19 outbreaks on college campuses across the nation are already resulting in students being sent home.

  • Europe is witnessing a resurgence of COVID-19 infections, including the UK, Italy, France, and Spain. The virus is still in charge.

  • Sovereign matters:

    • 99% of Argentina’s debt has been restructured. Now what?

    • Most of Ecuador’s debt has been restructured, and their sovereign debt upgraded.

    • Congo and Angola have been downgraded, while Cape Verde’s outlook has been revised down.

    • Japan’s Shinzo Abe has confirmed his resignation.

    • China’s big banks are bracing for souring loans.

Footnotes

¹ Bartash, Jeffry. “Initial Jobless Claims Fall 130,000 to 881,000, but Drop Tied to Change in Statistical Method.” MarketWatch (September 3, 2020).