Because of how the polls are trending, very few seem to be thinking about the fact that a Republican sweep of all three chambers of the government could happen. When you step away from the polls and think about the fact that Republicans currently control two of the three chambers, it becomes more realistic; and even more so when you consider that polls are likely skewed towards Democrats because of “silent” Republican supporters. If the Republicans sweep, or even just if Trump wins, then the sectors that will surge are energy, banks, healthcare, and defense. In particular, think names like Marathon Petroleum, Bank of America, Pfizer, and Northrop Grumman.
FINSUM: This may be unlikely, but it is not as wildly unrealistic as some make it sound. Perhaps smart to have a portion of the portfolio in these sectors headed into the election?
Some bad news on the jobs market emerged this week. In the weekly data, another 1.3m Americans applied for unemployment assistance. That number has stayed steady for weeks and shows no signs of abating. But it is other contextual info that makes that number worse. For instance, job openings are now declining, with total numbers in July down versus June. Growth in worker hours is also waning after growing for several weeks. Finally, google searches for “file for unemployment” are growing.
FINSUM: When you take all this together, a comprehensive picture is starting to show. It appears that the rising COVID cases may now be seriously putting a halt on the recovery.
In what looks like a very positive sign for the housing market, US mortgage rates have just hit an all-time low. The 30-year rate for fixed rate mortgages is 2.98%. The stat comes from Freddie Mac and it is the first time ever that rates have fallen below 3%. The super low rates have sparked a refinancing boom and stoked confidence in the real estate market. Some have wondered why mortgage rates haven’t fallen faster given the plunge in the general yield environment. According to Freddie Mac, this is because banks have been so overwhelmed with demand for mortgages that lowering rates didn’t make sense. In Freddie Mac’s words “There is no point in lowering prices to gain business you can’t close anyway”.
FINSUM: It seems like rates may fall even further as lenders catch up with demand. Overall, the housing market is looking very strong.
Investors are wondering how we are going to escape this exhaustingly choppy market. Markets are fighting higher generally, but it seems like 2 steps forward, 1.9 steps back. So how we will we break out of this mode? The answer might be another $1 tn+ stimulus package from the government. Some are skeptical this will happen because many believe Demcorats in the House don’t want another package because it might help Trump’s chances. That seems to be short-sighted analysis, as Democrats need another package to help avoid layoffs in key states they want to win, which could jeopardize their odds. Republicans want more stimulus to aid in their various reelection bids.
FINSUM: Both sides want a package. The big issue seems to be the continuation and size of expanded unemployment aid. Rumor is a deal might come before July 31st.
Markets were up big yesterday. Most of the reason why seemed to be some great indications from an ongoing COVID vaccine study. Moderna seems to have reached a breakthrough in its COVID vaccine trials, and the promising results ensured a bigger study at the end of this month. All stocks that are considered COVID-sensitive, such as airlines and cruise lines, rose on the news. According to Invesco, “The way it’s looking at the moment, it really looks as though a vaccine is the only hope. This thing is not going away”.
FINSUM: That Invesco quote is sad, but appears entirely accurate. COVID does not seem to be fading whatsoever on its own, so a vaccine is the only thing that is going to return the world, including markets and the economy, to normal.