Week in Review: June 19, 2020 Fed’s Committed to Using Its Full Range of Tools to Support the Economy

A weekly recap of major events and headlines affecting the market with individual investors in mind.

Economy:

  • An announcement from Fed Vice Chair Quarles that a new stress capital buffer framework has been added, along with three economic recovery scenarios, to a sensitivity analysis for banks related to their stress testing and the COVID event.
  • Boston Fed President Rosengren said he thinks the second half rebound is likely to be less than what was hoped for at the onset of the pandemic and that more fiscal and monetary policy stimulus will likely be needed.
  • House Speaker Nancy Pelosi (D-CA) at press conference introduces infrastructure legislation will include renewable energy, rural broadband, and rebuilding schools
  • President Trump in WSJ interview says he believes China encouraged international spread of COVID-19; says, “There’s a chance it was intentional
  • The Department of Justice released today a set of reform proposals to update the outdated immunity for online platforms under Section 230 of the Communications Decency Act of 1996. Responding to bipartisan concerns about the scope of 230 immunity, the department identified a set of concrete reform proposals to provide stronger incentives for online platforms to address illicit material on their services while continuing to foster innovation and free speech.
  • Fed Chair Jerome Powell’s comments in front of House Financial Services Committee
    • Fiscal support has had a positive impact on the economy.
    • Repeats that Fed’s committed to using its full range of tools to support the economy.
    • Evidence is mixed; doesn’t feel negative rates are appropriate, at least at this time, in the U.S.
    • Expresses concern that Congress should not pull back from support too quickly.

Covid-19:

  • COVID-19 hospitalizations are increasing in 17 states
    • California reports 4300 COVID-19 cases on Thursday versus 3753 cases the day before
    • Texas reports 3516 COVID-19 cases on Thursday versus 3221 the day before
  • Former FDA Commissioner Dr. Scott Gottlieb CNBC interview: Overall hospitalizations are increasing in some states; The good news is that hospitalization rate & death rate as a percentage of total cases are going down in these areas
  • Researchers in Wuhan, China in a non-peer reviewed study say that there may be no immunity to COVID-19, according to SCMP
  • Dexamethasone reduced the mortality rate, cutting the risk of death for patients on ventilators from 40% to 28% and for those on oxygen from 25% to 20%. That’s a material improvement alright and great to hear, but it does not eradicate the possibility of dying if one needs a ventilator or oxygen because they have COVID-19.
  • Follow up to report that Beijing shut its schools due to concerns around COVID-19 and Texas has reported new high for hospitalizations

Other News:

  • Apple follow-up; Bloomberg reporting the co will be re-closing some US stores in Florida, Arizona, South Carolina, and North Carolina due to COVID-19 spike in cases
  • The new survey data from the American Association of Individual Investors (AAII) is out this morning, and it’s another signpost that says “this is not a speculative euphoria”, with the Bull Ratio dropping back into the low 30’s, and nearly 50% of respondents saying they are bearish on the market overall (versus less than 25% saying they are bullish)
  • Jeremy Grantham (co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo) that he thinks we are in the “real McCoy of bubbles” and that he thinks the goal number for equity exposure in the U.S. is zero

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