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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 up – and 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 Europe – with the potential for more lockdowns and contracting economic activity – is 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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Thai Sept consumer mood drops for first time in 5 months, protests weigh

Thai Sept consumer mood drops for first time in 5 months, protests weigh

BANGKOK, Oct 8 (Reuters) – Thai consumer confidence dropped in September for the first time in five months on concerns about growing political protests, a slow economic recovery and job losses from the coronavirus pandemic, a university survey showed on Thursday.

The consumer index of the University of the Thai Chamber of Commerce fell to 50.2 in September from 51.0 in August.

“Various political gatherings made people have no confidence in government stability,” while the surprise exit of the country’s finance minister last month was negative, university president Thanavath Phonvichai told a briefing.

Demonstrators have rallied against the military-backed government in larger numbers in recent months, with some also calling for reforms of the powerful monarchy. The next big protest is set for Oct. 14.

Consumers felt the economic situation remained bad as tourism has yet to recover, Thanavath said.

“If the situation does not improve, there may be more than 500,000 job cuts in the sector in the fourth quarter,” he said.

Thailand has recorded no foreign tourists since April and relatively few infections due to a travel ban designed to keep the coronavirus at bay.

It aims to receive its first visitors later this month as part of an incremental reopening, but only a small fraction of the usual influx.

Recent government stimulus measures are positive, but most consumers felt the economy would recover in the second half of next year, Thanavath said.

The university predicts Southeast Asia’s second-largest economy to contract 7%-9% this year before growing 3%-4% next year, he said.

(Reporting by Kitiphong Thaichareon Writing by Orathai Sriring; Editing by Martin Petty)

(([email protected]; +662 0802309; Reuters Messaging: [email protected]))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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