Weekly Market Update

Author : Rachel Poole
Date : July 11, 2020

Global Market News

Global equities little changed
Global equities were little changed on the week. Market fluctuations this week displayed the heightened fear that the US economic recovery will lose progress as the number of Covid-19 cases surges. Reflecting such uncertainty, the yield on the US 10-year Treasury note dropped from 0.68% last Thursday to 0.65% at market close this Friday. The price of a barrel of West Texas Intermediate crude oil dropped about a dollar, ending the week at $38.84. Volatility, as measured by the CBOE Volatility Index, remained right around 27.

OECD says 2020 will end with highest unemployment rate since Great Depression
This week, the Organization for Economic Cooperation and Development (OECD) said 2020 will end with the highest unemployment level since the Great Depression. The group expects the jobless rate in advanced economies to average 9.4% without a second wave of the virus. In the event of a second wave of lockdowns, the average could easily reach 12.6%, the OECD predicts. Because of such high levels, the OECD warn against the withdrawal of emergency measures in place to support employment.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 12,400,000 Global Covid-19 deaths: 557,000
US Confirmed Covid-19 cases: 3,320,000 US Covid-19 deaths: 136,000
*As of Friday evening

Covid-19 surges across US
The number of US Covid-19 cases continues to surge in the nation’s three most populous states: California, Texas, and Florida. Other states are also seeing upticks which has pushed governors in almost 30 states to pause or reverse the reopening process. Credit card utilization, mobility indices, and retail data reveal that consumers have become more cautious in the last couple of weeks. Investors have become increasingly concerned that a V-shaped recovery is not going to persist. Furthermore, the enhanced unemployment benefits that have been providing individuals an extra $600 per week are set to expire at the end of the month.

Walt Disney reopens amid pandemic
Despite a dramatic increase in Covid-19 cases in Florida over the last few weeks, Walt Disney world opened to annual pass holders this week and will be opening to the general public this weekend. The theme park has rolled out new safety requirements, including temperature checks, face coverings, and extra sanitation efforts. SeaWorld, Cedar Fair, and Six Flags have all experienced moderate traffic at their parks since re-opening.

Geopolitics Spotlight

Hagia Sophia to become mosque
A Turkish court has ruled that the famous sixth century Hagia Sophia must revert back to a mosque. The world-renowned piece of architecture was originally a Byzantine cathedral, then an Ottoman mosque, and was converted into a museum in 1934, making it a symbol of secularism in modern-day Turkey. President Recep Tayyip Erdogan supports the transition of the Hagia Sophia to a mosque because it brings him closer to fulfilling his pledge of making more room for Islam and, in turn, winning over more Muslim voters. The court ruling is opposed by the US and others who warn that Ankara may be ruining a “unique emblem of exchange” between Christians and Muslims.

Australia offers Hong Kongers pathway to citizenship
Australia is following in the United Kingdom’s footsteps and is offering 10,000 Hong Kongers, who are currently on student or temporary visas, a pathway to residency. Furthermore, Australia is joining Canada in suspending their extradition treaties with the territory. All of this is in response to China’s new national security law for Hong Kong. The city is rapidly changing as a result of the new law. China’s government opened a new outpost called the Office for Safeguarding National Security, appointed a party commissar to work with Hong Kong’s chief executive, and pulled politically sensitive books from circulation, among other actions.

US Social & Political Developments

Biden unveils economic revitalization plan The expected Democratic US presidential nominee and former vice president, Joe Biden, has outlined an economic revitalization plan. The $700 billion recovery plan centers on a “buy American” economic agenda. Nearly $400 billion would be dedicated to government purchases of US-made goods and services in order to revitalize the manufacturing sector. The other $300 billion would go towards research and development in new technologies and green-energy investments.

International students face uncertainty International students attending universities and colleges in the US will not be allowed to stay in the US if their programs move fully online. Students will have to transfer to schools that are offering in-person instruction or have no other choice than to leave the country. This rule could affect hundreds of thousands of international students who are enrolled in university programs this fall. Schools that are already struggling to safely reopen in the fall and are now scrambling to comply with new regulations to support their foreign students, a group that is a major source of revenue for many higher education institutions. The issue is being seen by many as the Trump administration’s latest move to restrict immigration amid the Covid-19 pandemic.

Corporate/Sector News

United Airlines could layoff 36,000 This week United Airlines told 36,000 of their pilots, flight attendants, and customer-service employees that they may be furloughed come October. If the airline carrier has to go through with the entire cut, more than 40% of its staff would be laid off. The company hopes to limit the number of layoffs by offering early retirement packages. Air travel plummeted 90-95% from March to mid-April and is very slowly recovering. United Airlines said it hopes it will be able to rehire staff once demand returns, but this is currently a very distant and uncertain prospect.

43% of Berkshire’s portfolio is Apple As of the end of May, Berkshire Hathaway, a company that prides itself on its diversification, held 245 million shares of Apple. This $91 billion worth of Apple comprises 43% of Berkshire’s portfolio. Warren Buffett the CEO of Berkshire Hathaway who once declared “Diversification is protection against ignorance”, says he doesn’t think of Apple as just a stock. Buffett says “I think of it as our third business” and believes it is the best business in the world that he knows. Earlier this week, Berkshire Hathaway announced it is buying Dominion Energy’s Gas Transmission & Storage segment for $9.79 billion in cash.

This week from Black Summit

Economic Recovery and Market Trajectory John Charalambakis

Covid-19 and the Day After Rachel Poole and Tyler Thompson

Image of the Week

Video of the Week

Global China: Assessing China’s Growing Role in the World

Source: Brookings Institute