EQUITIES ADVANCED ON VACCINE HOPES

Equities advanced on renewed hopes for a drug to fight the virus. The NYT reports the FDA is in talks with Gilead to make the medicine available quickly. Dr. Fauci, head of National Institute of Allergy and Infectious Diseases stated this morning that he expects a decision from the FDA “relatively soon” as to whether the drug can be used.

Moreover, according to the WSJ there are seventy drugs racing to the market. Drug giant Pfizer stated it would begin testing its experimental vaccine in the US as early as next week. Oxford University researchers said their vaccine candidate could be available for emergency use as early as September.

The Trump Administration stated yesterday that is drastically cutting the estimated time needed to develop a coronavirus vaccine with the goal of having 100 million doses by year’s end.

This time frame is dramatically faster than the 12-18 months that is consistently referenced. But I ask is today not typical? Society and the economy are on the verge of a complete implosion and dramatic action is required.

Speaking of which, there are some governors that advocating a total obliteration of the virus before reopening, utilizing the strategy recommended by various epidemiologists of “test, trace and isolate.”

Many believe the above is impossible. Moreover, a large minority of epidemiologists are now questioning the long-term safety of mass quarantines and shutdowns stating that society may emerge weaker if and when this and other viruses reemerge.

The data collected has vastly altered initial assumptions about the virus with many now stating—based on real time data–for most the virus is either asymptomatic or have only mild symptoms. The data has clearly identified the at-risk population.

Radically changing topics, will cost push –wage inflation—emerge as a major issue? The WSJ reported that over half of the laid off workers are making more money now than while when they were working. Several senators expressed this inevitability when the initial stimulus was passed.

Will these workers demand higher wages? Unless extended these benefits end on July 31.

Speaking of hiring, the US Chamber of Commerce supports legislation prohibiting legal actions against companies whose workers may contract the virus. Most will agree without legislation companies will tepidly hire, fearing crippling legal liabilities.

Initial jobless claims are released at 8:30. Analysts are expecting an increase of 3.5 million, the smallest increase March 20. In six weeks, the economy would have lost almost 30 million jobs. Wow!

Commenting about yesterday’s FOMC meeting, Chairman Powell stated “the time will come again and reasonably soon I think where we can think about a long-term way to get our fiscal house in order.” Up to this point “this is not the time be concerned on federal debt for we are just trying to maintain economic sustainability.”

The Chairman states the key to the recovery is “getting people back to work.”

In my view, the Committee broke no new ground, stating that economic activity will drop at an unprecedented rate in the second quarter and it will use all its tools at its disposal and act as appropriate to support the economy.

What will happen today?

Last night the foreign markets were mixed. London was down 1.17%, Paris down 0.32% and Frankfurt down 0.38%. China was up 1.33%, Japan up 2.14% and Hang Sang up 0.28%.

The Dow should open moderately lower. Oil is surging on news global demand is rebounding from incredibly lower levels. The 10-year is up 6/32 to yield 0.61%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.