Weekly Market Update

Author : Rachel Poole
Date : April 24, 2021

Global Market News

Global equities drop slightly
Following a record-breaking week, global equities declined this week. The S&P 500 ended the week down 0.13%, while the Dow Jones and Nasdaq also dropped 0.46% and 0.25% respectively. The yield on the US 10-year Treasury decreased to 1.55% at Friday’s close and the price of a barrel of West Texas Intermediate crude oil fell to $62.15 from $63.35 a week ago. Volatility, as measured by the CBOE Volatility Index, rose more than a point to end Friday at 17.07.

Biden proposes higher capital gains tax
This week, US President Joe Biden proposed an increase the capital gains tax, leading investors to question high equity valuations and markets to take a brief tumble on Thursday. President Biden seeks to increase the capital gains tax for Americans making more than $1 million per year to fund what he calls the “American Families Plan”. The proposal could nearly double the current capital gains tax which stands at 20%. The $1 trillion American Families Plan includes measures to help US workers learn new skills, expand subsidies for childcare and make community college free for all.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 145,000,000 Global Covid-19 deaths: 3,070,000
US Confirmed Covid-19 cases: 32,000,000 US Covid-19 deaths: 570,000
*As of Friday evening

India sets new pandemic record
India set a new world record for daily Covid-19 infections this week. On Friday, India reported more than 330,000 new cases and more than 2,100 deaths in just a 24-hour period. In response to the pandemic’s surge in the country, the capital of New Delhi has imposed a week-long lockdown. The wave of infections has also forced India, a major producer of Covid-19 vaccines, to delay global exports of the shots as they try to meet domestic vaccine demand and bring infection rates down. The export delay could have a significant effect on COVAX, the global initiative aimed at providing equitable access, which has been a primary provider of vaccines to developing countries.

Geopolitics Spotlight

Russia to withdraw troops from Crimea

In a move that could ease tensions between Russia and Ukraine, the Russian defense ministry ordered the withdrawal of some Russian troops from the Crimea region. Russian Defense Minister Sergei Shoigu claims the buildup of troops was simply a test of military readiness and that soldiers will resume their regular positions by May 1^st. While troops are being pulled back from Crimea, which was annexed by Russia in 2014, there is also a buildup of Russian military forces in the Donbas region of eastern Ukraine. It is estimated by European officials that Russia has deployed nearly 100,000 troops near the Ukrainian border, heightening concerns of a full-scale war with Ukraine. In a tweet, Ukrainian President Volodymyr Zelensky said the withdrawal would help reduce tensions. Recently, both President Zelensky and Russian President Vladimir Putin have signaled they are willing to meet for talks.

Chad’s president dies
President of Chad Idriss Deby Itno died this week from injuries sustained during a fight against rebel forces. News of his death came just hours after he had been declared winner of Chad’s most recent presidential election, giving him another 6-years in power to tack onto his 30-year reign. The military has named President Deby’s son as the country’s interim leader for the next 18-months.

US Social & Political Developments

Biden’s hosts climate summit
President Joe Biden held a climate summit on Earth Day, April 22^nd. Forty world leaders, including Chinese President Xi Jinping and Russian President Vladimir Putin, attended the two-day virtual summit on climate change. At the event, several countries made pledges to reduce greenhouse gas emissions. President Biden said the US would halve its emissions by 2030, the United Kingdom (UK) pledged to cut emissions by 78% of its 1990 level by 2035, and Brazil aims to achieve net-zero emissions by 2050. The summit signaled President Biden’s commitment to making the US a global leader in combating climate change.

Officer Derek Chauvin found guilty of murdering George Floyd
US police officer Derek Chauvin was found guilty of murdering George Floyd a year after the incident which sparked national and worldwide protests for police reform. Floyd, a black man, died after Chauvin pressed his knee into Floyd’s neck for more than nine minutes. Chauvin was convicted on two counts of murder and one count of manslaughter. The verdict brought relief to many but community leaders, activists, and lawmakers say that this is just the beginning of the work needed to address systemic racism and police brutality.

Corporate/Sector News

Ant Group exploring new options
Ant Group is exploring ways for founder Jack Ma to divest his stake in the company and give up control as he continues to be under scrutiny. Ant Group was set to become the world’s largest IPO in November but was pulled by the Chinese government for “regulatory” reasons. Jack Ma has been fighting with Chinese authorities for the last several months as Chinese President Xi Jinping tried to claim tighter control of the economy. Ma’s exit could be the only way for Ant Group to revive its plans to go public.

Swarm traders fail to bring up Dogecoin
“Swarm trading” is a new term circulating in the financial world to describe the trend of group trading where people decide to invest in names, ignoring fundamentals. We’ve seen this occur several times over the last year with the GameStop and AMC short squeeze and bankrupt-Hertz’ bid-up. This week, swarm traders set their sights on Dogecoin in a highly publicized event called “Doge Day”. The event was a failed effort to bring the cryptocurrency to $1 from its current valuation of $0.09.

SPAC transactions slow down
After hitting a record of 109 new SPAC (special purpose acquisition companies) deals in March and breaking the 2020 issuance record, the number of issuances has significantly slowed with only 10 SPACs so far in April. A SPAC raises capital through an initial public offering (IPO) for the purpose of merging with an existing operating company. The slowdown seems to be linked to the new accounting guidance issued by the Securities and Exchange Commission which classifies SPAC warrants as liabilities instead of equity instruments.

This week from BlackSummit

Reopening & Execution Risks: Earnings Expectations and the New Wave of Innovations in Historical Perspective – John E. Charalambakis

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

Image of the Week

Visualized: The Economic Benefits of a Green Recovery

Video of the Week

Video: China, Russia and the new space race
Source: Financial Times