Day 141 of Quarantine and Counting

Searching for silver linings 

There wasn’t much new economic data this week, but we got our usual (un)friendly reminder about our dire employment situation. Seasonally adjusted new jobless claims increasedlast week. Silver lining – auto plants typically shut down for holidays in July but that’s not happening this year, so the seasonal adjustment meant to normalize for this is making the seasonally adjusted numbers complete garbage. Unadjusted new jobless claims actually fell 142k to 1.37m. I feel like we’ve gotten so desensitized to seeing these weekly job losses in millions that it’s worth the reminder that the highest weekly number we’ve seen before COVID-19 was 695k in 1982. Four months into this crisis, we’re unfortunately still running in the millions

Moral of the story: Continuing claims fell by 1.1m last week and it’s great to see people returning to work, but we still have millions losing jobs every week. At this point, I’m waiting to see what Congress does about the robust federal unemployment benefits running out this week. But as more time passes, it’s becoming painfully apparent that recovering many of these lost jobs is going to be a slow and painful process. 

Battlefront successes 

There were two updates on the COVID-19 battlefront worth noting that moved markets this week. The first was on Monday when the vaccine being developed by Oxford and AstraZeneca produced a promising immune response in an early-stage human trial. The second was on Thursday when Pfizer and BioNTech announced they had secured $2b from the US Government for 100m doses of their vaccine, which will be provided to Americans for free. The US Government also has the ability to acquire an additional 500m doses. 

Moral of the story: There are at least 23 vaccine candidates already in human trials around the world. With this level of brain power, it seems likely we will have some sort of widespread vaccine available by late summer/early fall next year. In the meanwhile, cases and deaths continue to rise at an alarming pace in the US – wear those masks, folks.

Earnings season update

We’re two weeks into earnings season and we’ve heard from about 20% of the S&P 500 so far. The bar is literally so low overall that almost 75% of companies that have reported have exceeded Wall Street’s expectations. At the same time, the bar is so high for stocks that have performed well through the pandemic, like Netflix, that any bad news in their earnings report is sending stocks tumbling. 

Moral of the story: We’re expecting about a 40% decline in profits this quarter but we knew we were going to have to hit **delete** on this quarter. The bigger question is what’s coming, but the second wave of shutdowns across the country is making it really difficult for companies to provide any sort of forward-looking guidance. 

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