Closing the Economy does Not Work

August 24, 2020

Market Update 2020-08-24.

Equity markets rose last week with the S&P 500 up 0.77% last week, led by cyclical groups industrials and technology.  This index sits at a new all-time high.  We will say it again, “can you say V-bottom”? This pushed the S&P 500 index to up 6.5% year to date and almost 18.5% year over year off an easy comp in the summer of 2019.

The Nasdaq continues to lead the markets supported by ultra-low long-term interest rates. The NASDAQ sits the year up 26.9% year to date.  Ultra-cyclical groups such as energy and banks, while stellar off the March 23 lows, are the year-to-date laggards, down almost 39% and 20% respectively.

The Economy, Stocks and Covid

U.S. equity futures are pointing higher on news that the FDA authorized the use of blood plasma as a treatment for serious coronavirus cases and the Trump administration is considering fast-tracking a U.K.-based vaccine. The rate of daily infections in the U.S. continues to collapse.  We are seeing some resurgence in other countries, including Spain, France, Germany and Japan. Also, back-to-school combined with this week’s dual hurricanes could reaccelerate cases domestically here in the South by mid-September. Even with that, US has more counties with high prevalence (>12,500 cases per 1 million residents) is akin to herd immunity.

Foremost, the explosion in cases in Europe is not a good thing.  It means there really is no such thing as “closing the economy” and eradicating COVID-19.  In fact, Europe’s renewed outbreak is a strong argument for the notion of an infection breakpoint and herd immunity.

Resources

  • Our complete second half outlook has been also posted and can be found by clicking here.

Weekly market updates contain general information and expresses views of Oak Harvest Investment Services. Data, Articles, and information cited are believed to be reliable at the time of creation, but are not guaranteed. Nothing in this content is intended as, nor should it be regarded as, personalized investment advice. Strategies and ideas discussed may not be right for you.  Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Indexes are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.