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Both the bond complex and U.S. equities advanced while many other global equities largely consolidated last week.
The President implemented marginal fiscal relief through executive order last week. While these actions are supportive of the real economy, it is necessary for Congress to act if larger stimulus is to be passed.
In many states, the COVID data at rt.live are painting a picture of flattening infection numbers after a noticeable bump higher. Arizona, after being touted as a significant hotspot, now has the lowest effective reproduction number of all 50 states. Florida, another state touted as an end of the world hot spot, now has an effective reproduction number below 1.0 and is “in the green”. It is possible that the U.S. is at the leading edge of significant improvement in the number of COVID infections. Should this scenario play out over the next few weeks, it could be supportive of equities and could put pressure on bonds as safety trades are unwound. Additionally, the above scenario could cause a rotation out of technology and into lagging sectors like consumer discretionary, energy, and financials. Be wary of COVID infection information as pushed by the main stream media, as much of the main stream media appears to have a political agenda. Seek out solid data where possible.
While COVID infection data appears to be improving, there is a concern regarding a “back to school” bump. Will throngs of children heading back to school cause a reignition of infections? If not, then the move away from the safety trade, as noted above, could accelerate.
Bookmark this COVID-19 site. https://rt.live
Best
Cory Haupt
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