7/5/2020: Weekly Wrap-up and What to Expect


Daily COVID cases continue to hit all-time highs and hospitalizations have begun increasing, but deaths remain on a downward trajectory for now.


Market Movers

The S&P 500 increased by 3.6% this week as the U.S. added 4.8M jobs in June, reducing unemployment to 11.1%. However, daily COVID cases continue to hit all-time highs and hospitalizations are beginning to trend up. Deaths, on the other hand, have not seen a parallel spike, but will likely tick up at a slower rate. How should we interpret this information? Here are the details:

  1. 📉 Daily COVID cases hit all-time highs and hospitalizations started trending upwards. Last week, we saw daily COVID cases hit record levels and hospitalizations trending upwards. However, the S&P 500 increased nearly 4%. The inverse relationship between daily COVID cases / hospitalizations and the S&P 500 can be explained by general optimism from forward-looking investors who believe the impact on the economy by COVID will be temporary and are confident in the research & development behind a COVID vaccine.

  2. 📈 Deaths continue to decline despite spiking cases and increasing hospitalizations for the past two weeks. Overall, deaths related to COVID are still on the decline, even after two weeks of rising COVID cases. This finding can likely be explained by the median age of new cases decreasing from mid-50’s to early-30’s. Earlier diagnosis and treatment is also likely preventing a corresponding surge in deaths. Overall, this is a metric we will need to continue monitoring closely, but is a positive sign for our ability to combat COVID.

  3. 📈 The June jobs report indicated an additional 4.8M jobs added in June, reducing unemployment to 11.1% and beating expectations. On the final day of trading last week, the government released the June jobs report indicating ~4.8M jobs being added to the economy, reducing the unemployment rate to 11.1%. This announcement beat expectations of ~2.9M jobs added and a 12.4% unemployment rate. Many are uncertain whether the quickly improving unemployment numbers will continue with the recent spike in COVID cases, but last month’s jobs numbers certainly bring confidence in the ability to raise employment levels if COVID is kept under control.

WX Capital maintains our view that the stock market will be volatile in the near future. Rising COVID cases and hospitalization levels drag down positive news around state reopenings and reduced unemployment levels. This push and pull will continue for the near future, but positive developments around COVID will likely outweigh negative drawbacks over the long-term. We have added new biotech positions as a natural hedge against the volatility seen in the market due to COVID. Please don't hesitate to reach out with questions!