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Market Strategy Weekly – October 9, 2020

Market Strategy Weekly – October 9, 2020

Summary

In addition to its grip on our politics, COVID remains highly relevant to our portfolios. Near term, it is likely that the virus and related factors will continue to dictate returns.

The economy appears to be gathering steam, and this bolsters business and consumer confidence.

In our view, the general trend appears to be improving. We see this as relatively bullish, and it adds weight to our opinion that a gradual rotation toward cyclical areas of the market makes sense.

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US weekly jobless claims fall to 840,000, more than economist forecasts

US weekly jobless claims fall to 840,000, more than economist forecasts

  • New US jobless claims for the week that ended Saturday totaled 840,000, the Labor Department said Thursday. The reading landed above the consensus economist estimate of 820,000 but marked a slight decline from the previous week’s revised figure.
  • Continuing claims, which track Americans receiving unemployment benefits, fell to 11 million for the week that ended September 26. That was also lower than economist expectations.
  • Visit Business Insider’s homepage for more stories.

The number of Americans filing for unemployment benefits edged lower last week in a modestly encouraging sign for the labor market’s prolonged recovery.

New US weekly jobless claims totaled an unadjusted 840,000 for the week that ended Saturday, the Labor Department announced Thursday. That reading came in above the median economist estimate of 820,000 compiled by Bloomberg, but reflects a slight decrease from the previous week’s revised figure.

Continuing claims, which track the aggregate total of Americans receiving unemployment benefits, declined to 11 million for the week that ended September 26. The reading came in below the median economist estimate of 11.4 million.

Read more: A $2.5 billion investment chief highlights the stock-market sectors poised to benefit the most if stimulus is passed after the election — and says Trump ending negotiations doesn’t threaten the economic recovery

Thursday’s report holds “a mix of worrisome and hopeful readings” on the nation’s labor market, Nancy Vanden Houten, lead US economists at Oxford Economics, said. On one hand, the number of Americans receiving regular state benefits fell by 1 million in the week ended September 26.

Yet “the number of individuals who have exhausted regular benefits continues to climb, further evidence of more long-lasting scarring effects from the pandemic,” she added.

The roughly 64 million unemployment-insurance filings made since early February handily overshadow the 37 million filings made during the 18-month long

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Weekly CEF And Market Commentary: Sept. 28, 2020

Weekly CEF And Market Commentary: Sept. 28, 2020

(This report was released on Sept 27. All data herein is from that date or prior.)

Macro Picture

Large caps are now in correction territory, having fallen 10% from the recent peak of Sept. 2. The correction started with some high-flying tech stocks falling back. We have gone through the dynamics of what drove those stocks upand back down in prior writings. The one bright spot was Nike (NYSE:NKE) which reported a sharp rebound in sales this summer.

Then we have the uptick in COVID-19 cases, especially in Europe. Here’s the First Trust COVID Tracker which has a ton of updated information on the virus. This increase in Europewith the potential for more lockdowns and contracting economic activityis weighing on markets.

Lastly, the death of Supreme Court Justice Ginsburg has thrown a monkey wrench into the stimulus talks. The prospects of a new deal were slim on Monday and Tuesday but perked up late in the week as details emerged of discussions between Nancy Pelosi and Treasury Secretary Steven Mnuchin. A new $2.4T deal emerged which is likely a starting point of new negotiations. The major indices rallied on the news on Friday.

Chart

Data by YCharts

From JPM:

Equities continue to experience their deepest correction since bottoming in March, but focusing only on stock market declines misses the equally-important erosion in cross-asset correlations that has emerged this month. Few of the safe assets are moving in the expected direction: USD is up 2% versus EM FX and 10Y German yields are down 10bp, but US 10Y & 30Y yields, USD/JPY and EUR/CHF are almost unchanged. Gold is off 6%. So a typical basket of defensives is functioning about as well as fire insurance that covers just one bedroom in the house. This risk-management problem

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