COVID-19 cases continuously remain on the downward slope in the United States, while there is rise in cases in the European Zone.
Sweden is still the country to watch, as it never enforced a lockdown, and its cases are now declining. We’re keeping a close eye on if the resurgence in Eurozone cases will also cause an increase in Sweden. If so, this would suggest they have not hit the herd immunity threshold. If they do not rebound, then it would indicate they have achieved it, which would mean the infection rate does not need to be 70-80% and many other countries will also achieve immunity soon. See the below SEIR model to better understand this.
On another hot topic, the U.S. election is rapidly approaching. Mail-in-ballots are still a topic of concern. This uncertainty of legal and political battles will take time to work out, which could increase volatility until a winner of the election is declared. The Trump campaign has made inroads in some key battleground states, but they are also short in cash. Both of these major headlines are impacting the economy.
GDP - Unemployment
Unemployment numbers are improving, as job opening rates increased from 4.2% to 4.5% back in June. But while job openings surge, actual hires fell just shy of 7 million in June to 5.8 million in July, a decline of about 17%. This suggests people are not looking for work and rather just waiting for their “anti-stimulus” checks.
It appears that many small businesses are folding as the lockdown has lasted longer than anticipated. The unemployed will need to find new employment, be re-trained, and likely new jobs need to be created. Therefore, it is likely to take some time for the unemployment levels to decrease going forward.
Money Supply & Asset Class Weighting
Money supply continues to slow down. I do not think we will see new highs until the economy is fully open, banks begin to lend money, and/or a new stimulus package is passed. Ultimately, we need to reopen the economy to have a sustainable growth rate.
We are getting close to the all-time high of price points for dollar cost averaging. Usually, there is resistance, and it takes a couple of attempts for the market to break through new highs. But we continue to climb the wall of worry. Also, the U.S. dollar has stabilized over the last couple of weeks. It is not a coincidence that gold is giving back some of its recent gains. Commodities are positive and, on a relative strength, the highest ranked asset class.
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Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.