Manufacturing Weakens, New Index Highs, and Is a Rotation to Value Stocks Finally Gaining Traction?
November 18, 2020 | FIRESIDE CHARTS
Manufacturing has slumped in the Empire State, underperforming expectations and coming in at 6.3 as businesses increasingly feel the weight of surging Covid cases. The Dow and the S&P 500® Index both hit new all-time highs on the Moderna vaccine news, and stocks favored by retail investors also saw a significant bump—could equally emotional reactions drive future volatility as vaccine developments and record case counts battle for column inches? Value sectors like Energy and Financials also climbed on the news in what could be a long-anticipated rotation away from growth stocks. The USD meanwhile has continued to weaken as the Yuan climbs—could it help the U.S. narrow the trade gap with China?
1. Covid strikes back? If so, this will likely get worse before it gets better…
Source: The Daily Shot, from 11/17/20
2. While bankruptcies have been somewhat tempered by lenders’ willingness to restructure loans, there may be a reckoning coming until the worst effected segment’s cash flow recovers. Then we have the current Covid explosion to deal with…
Source: S&P Global Intelligence, as of 11/15/20
3. Don’t underestimate the number of new stay-at-home investors. Will they add their emotion to market volatility in both directions?
Source: The Daily Shot, from 11/17/20
4. Moderna’s announcement of an apparent second successful trial vaccine has propelled the value trade in sectors beaten up by the pandemic.
Source: The Daily Shot, from 11/17/20
5. Bond dealers have been happy to sell their inventory of low-yielding bonds to yield-starved investors…
Source: The Daily Shot, from 11/17/20
6. Many commodities have seen an impressive post-lockdown price rise…
Source: The Daily Shot, from 11/18/20
7. The USD has resumed grinding lower and now has the 2018 lows as the next support level.
Source: The Daily Shot, from 11/18/20
8. China’s global influence is on the rise as it comprises the world’s largest economic trading zone…
Source: Statista, from 11/17/20
9. How far will China let its currency rise? (A higher yuan means Chinese goods are more expensive and U.S. goods are cheaper)
Source: The Daily Shot, from 11/17/20
10. China has been orchestrating a normalization of their bond yield curve, with their ten-year government bond rate rising to 3.3%. The higher yields continue to put a bid under the Yuan…
Source: The Daily Shot, from 11/18/20
11. The vaccine news is terrific. The markets tend to look ahead about 6 months which explains the recent market surge and rotation. But the pandemic is going to be brutal on America in the interim; today or tomorrow we will pass 250,000 deaths in the U.S. May this third wave be the last…
Source: JHU CSSE, as of 11/17/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.