30 Jun RECOVERY TRUMPS CASES
Equities rose after better than estimated economic data offset concern over an increase in coronavirus cases. US pending home sales posted a record gain, exceeding all forecasts.
Second quarter earnings season is about to commence and according to Bloomberg the potential earnings recession may be less severe than expected. The newswire reports there is one measurement of upcoming profitability based upon revisions reached its highest level in the index’s 20-year history on June 17.
There is no conviction as to where equities will be by year end. According to a survey conducted by DataTrek Research, roughly 10% of respondents are suggesting a 10% decline and 10% are predicting a 10% gain from current levels.
Regarding the election, 48% are expecting Joe Biden to win and 43% are foreseeing a Trump victory. The survey states political expectations are weighing high on market views. Respondents believe if Trump were to win, the odds are twice as likely to think the markets would have a double-digit gain and vice versa.
I must write historically democrats produce a greater positive market response given their propensity to spend more than republicans.
As I reiterated the other day, there is a distinct possibility that all must learn how to live with the disease. It is widely accepted shutting down society again is not an option.
How much will the increase in cases affect the ongoing V shaped recovery? Unfortunately, only history will answer this question. Over 600,000 people are now tested daily, up from about 7,000 four months ago. More testing will find more cases. In my view hospitalizations and ICU admissions are perhaps a better indicator to the severity of the outbreak.
And then there are vaccines and treatment. According to the CDC there are over 15 vaccines in phase III testing. There is a distinct probability a vaccine may be available by summer’s end. To write the obvious, all would cheer this discovery.
Just as an aside, nationally according to Johns Hopkins cases increased yesterday by 1.2%, below the average daily increase of 1.6% over the past week. Hospitalizations are down 0.4% and ICU admissions down 4.9%. Deaths rose 0.2%, the smallest increase in 11 weeks.
What will happen today?
Last night the foreign markets were up. London was down 0.42%, Paris up 0.17% and Frankfurt up 0.55%. China was up 0.78%, Japan up 1.33% and Hang Sang up 0.52%.
The Dow should open flat om concerns that new virus infections could slow the pace of re openings. The 10-year is off 2/32 to yield 0.64%.