Political Tension and Stalled Recovery Spark Market Losses, and What’s Ahead for Bond Yields?
July 24, 2020 | FIRESIDE CHARTS
Equities have sunk on growing political tension with China and new, depressing Covid-19 milestones—the U.S. passed 4 million cases yesterday as global cases climb at nearly 300,000/day—and look to have lowered their expectations for a swift economic recovery. 20% of the American workforce remains unemployed as week-over-week state claims climb for the first time since March. And as European investors continue to flee the fixed income market, the paltry 10-year U.S. Treasury yield is testing its bottom support line and will soon have to break out to one side or the other…
1. How long and how severe will the “pause” be?
Source: WSJ Daily Shot, from 7/24/20
2. The new diplomatic spat has stalled the Chinese currency and stock market rallies…
Source: WSJ Daily Shot, from 7/24/20
3. Amid Covid, diplomatic spats, rising inflation expectations and low to negative global interest rates, gold is nearing its all-time high…
Source: WSJ Daily Shot, from 7/24/20
4. About 20% of the U.S. workforce remains unemployed…
Source: WSJ Daily Shot, from 7/24/20
5. The regional Fed Manufacturing reports continue to show recovery. The greatest unemployment is in the service sectors hit the hardest by Covid such as restaurants, entertainment and travel.
Source: WSJ Daily Shot, from 7/24/20
6. Here are some examples:
Source: WSJ Daily Shot, from 7/24/20
7. This bounce is important as housing drives durable goods, furniture and outfitting, as well as employment in the trades to improve the homes for new owners…
Source: WSJ Daily Shot, from 7/23/20
8. However, the Covid-19 resurgence is starting to show its economic impact again…
Source: WSJ Daily Shot, from 7/24/20
9. The 10-year U.S. Treasury yield is currently at its support line. By the end of summer this will have to break out one way or the other…
Source: WSJ Daily Shot, from 7/23/20
10. This only makes sense… Would you pay to have a corporation or government hold your money? Bonds are supposed to pay you interest, but not with negative yields!
Source: WSJ Daily Shot, from 7/23/20
11. The soon to be largest economy in the world is “emerging”?
Source: Statista, from 7/23/20
12. China’s very bifurcated. Some of the larger cities and the more developed providences have GDP per capita that looks like the relatively poorer countries in Europe. Most of the country is still pretty poor.
Source: Wikipedia, from 7/23/20
13. Globally, new cases are approaching 300,000/day.
Source: JHU CSSE, as of 7/24/20
14. OK, Boomer!
Source: WSJ Daily Shot, from 7/24/20
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.