Economic Outlook

BlackRock Makes A Run On Asian Stocks

Now that BlackRock has largely taken over Wall Street, whispers from its corridors are heavily weighted, and the latest two are troubling: It’s downgrading U.S. stocks and prefers the Asian market.

In other words, the king of Wall Street says it’s time to diversify.

After major market movement that has seen U.S. equities bounce back from a dismal March, BlackRock sees a new surge in COVID-19 cases as likely to put a dent in this trend.

On Monday, BlackRock–which oversees nearly $6.5 trillion in global assets–downgraded U.S. stocks from neutral to overweight, and advised clients to start shopping internationally for diversification.

Why? Because the amazing performance of the U.S. equities market this summer has largely been propped up by trillions of dollars in government stimulus and the Federal Reserve’s effort to save the corporate bond market by buying the bonds.

Now, unemployment checks will dry up. More stimulus remains in question, and COVID-19 is no longer flattening–it’s reviving itself with a vengeance as Americans in large numbers decide they simply don’t care or are impervious to the virus.

What investors will be watching carefully is the next policy decision to come out of Congress and the White House about stimulus. If they announce there will be no more unemployment benefits when they end in three weeks, there could easily be an equities sell-off…CLICK for complete article

The Days Of Madness Are Upon Us

 

I used to think the “believe 6 impossible things before breakfast” line from Alice Through the Looking Glass was one of the funniest things ever written. Until this year.. I’ve come to understand it’s a statement of simple fact for this corona-addled age. I really can’t believe just how confused, conflicted, unfocused and distracted the various threads of society are becoming.

While the virus is still lashing its way around the globe – hitting the Southern Hemisphere in winter – it does feels like its passing. Look for what happens in terms of new cases and outbreaks in Oz over the coming weeks for potential clues about a second wave to hit the North come autumn.

The Pandemic has become the defining event of the decade. As it eases, there are a whole series of unexpected releases occurring. Not just in terms of surprisingly strong snapback economic numbers due to 3 months of repressed consumer spending, but also in terms of bizarre behaviours as tension eases. As the global economy tries to rebalance after the shock, it feels we’re being deluged in a sea of delusional noise and madness..

Let me try to explain… without using the word “unprecedented”. Full Article

 

Biggest Decline In Earnings…Ever

 

Over the last quarter, the “Death of Fundamentals” has become apparent as investors ignore earnings to chase market momentum. However, throughout history, such large divergences between fundamentals and price have resulted in low future returns.

This time is unlikely to be different.

“During the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median Q2 EPS estimates for all the companies in the index,) declined by 37.0% (to $23.25 from $36.93) during this period. How significant is a 37.0% decrease in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate has been 3.2%. Over the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate has been 3.4%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate has been 4.6%. Thus, the decline in the bottom-up EPS estimate recorded during the second quarter was much larger than the 5-year average, the 10-year average, and the 15-year average. 

In fact, this marked the largest decline in the quarterly EPS estimate during a quarter since FactSet began tracking this data in Q1 2002. The previous record was -34.3%, which occurred in Q4 2008.

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The Bullish Test Comes As Earning Season Begins

 

While we are certainly more bullish on markets currently, as momentum is still in play, it doesn’t mean we aren’t keenly aware of the risk.

Pay attention to what you own, and how much risk you are taking to generate returns. Going forward, this market will likely have a nasty habit of biting you when you least expect it.

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Inovio Plunges On Interim Phase 1 Coronavirus Data; DNA Vaccine Shows 94% Response Rate

Inovio Pharmaceuticals Inc shares were moving to the downside Tuesday after the vaccine maker released interim Phase 1 data for the study that is evaluating its DNA vaccine against SARS-CoV-2, the virus that causes COVID-19.

Inovio’s Interim Phase 1 Efficacy, Safety Readouts: Announcing results from the first two cohorts of the Phase 1 trial, the Plymouth, Pennsylvania-based biotech said multiple immunology assays showed that 94% of participants demonstrated overall immunological response rates.

The readout includes humoral and cellular immune responses conducted for the 1 mg and 2 mg dose cohorts after two doses at week six…CLICK for complete article