8/30/2020: Weekly Wrap-up and What to Expect

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Trump made promises of a near-term COVID vaccine at the Republican National Convention


Market Movers

The S&P 500 climbed ~2.6% last week as the Feds indicated a prolonged period of low interest rates and Trump has been placing pressure on the FDA for accelerated COVID vaccine approval. Furthermore, COVID cases, hospitalizations, and deaths have been on the decline. There’s a lot going on, but we’ll break it down for you. Here are the details:

  1. 📈 COVID cases, hospitalizations, and deaths continue to decrease at a steady rate. The U.S. continues to recover as new cases per day average at ~40K, current hospitalizations average at ~40K, and deaths per day average at ~1K. While this is not optimal, there are signs of decline in each of these metrics, which we hope will continue as the nation recovers from this pandemic.

  2. 📉The number of reopening states and reversing states have remained steady with New Mexico reopening and Iowa reversing. The nation did not make significant progress this week in reopening states as the number of reopened/reopening states remain at 25 while 13 states have paused their reopening plans and 12 states are reversing their progress. States are taking extra precautions to prevent another rise in COVID cases, but the slow reopening progress will likely damage and put pressure on businesses as they are not able to operate at full capacity.

  3. 📈 Unemployment claims fall by 98K to 1M again as the nation makes progress to recover from the pandemic. The market took a sharp ~1% drop on Thursday when unemployment claims numbers were released as it claimed above 1M. Just last week, unemployment claims numbers fell under 1M for the first time since March. State reopenings and decreased COVID cases will help decrease this critical unemployment metric.

  4. 📈 Trump pressures the FDA to accelerate the launch of COVID vaccines, which benefits the economy, but brings uncertainty in vaccine quality. Last week, at the Republican National Convention (RNC), Trump made promises to the nation that a COVID vaccine could be available before the end of the year. Recently, Trump has put tremendous pressure on the FDA to allow for emergency use of convalescent plasma for the treatment of COVID patients. The markets responded positively as the S&P 500 climbed significantly on promises of a vaccine. While this is good for markets short-term, a botched vaccine launch due to accelerated development and approval may result in a significant and precipitous drop in the markets.

  5. 📈 Feds will allow inflation to reach >2%, indicating long periods of low rates in hopes of stimulating the economy. Chairman Jerome Powell announced that the Federal Reserve is shifting its inflationary goals to >2% and allow for longer periods of low interest rates to help revitalize the economy. The Feds adopted a formal 2% inflation goal in 2012 as an effort to help businesses and consumers anchor to a number so that they don’t make short-term decisions based on short-term fluctuations in inflation. Overall, this stance on inflation rates indicates a prolonged period of low interest rates that will hopefully help the economy recover.

WX Capital remains confident in U.S. economic recovery and stock market performance. The U.S. is seeing signs of COVID recovery even as state reopenings have been slower than expected. Furthermore, vaccine development has been on track and Fed policies are positioned to help stabilize and support the economy. As mentioned previously there are certain sectors we are looking at which haven’t experienced as great a recovery, which may benefit from a commercialized COVID vaccine. There is certainly value to be found in the markets right now. As always, please don't hesitate to reach out with questions!

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