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Observations & Insights (7/17/2020) Thumbnail

Observations & Insights (7/17/2020)

The market was mixed this week as states struggled with reopening and companies began to report earnings...

  • Coronavirus Spike Continues: Another record in US infections with over 75,000 new cases logged Thursday. Florida was one of 10 states to break its single-day death record with 156 new fatalities. Several states including Alabama, Arkansas, California, Colorado, Louisiana, and Texas are now requiring people to wear masks in public spaces. Several major businesses, including Walmart, Walgreens, Kroger, Best Buy, and Target, have also all recently instituted mask requirements. 
  • Retail Sales: Retail sales surprise to the upside again increasing 7.5% month over month (vs. 5.2% consensus). Speaking of retail, a recent study by JPMorgan Chase Institute found that Americans who received enhanced unemployment benefits spent 10% more than they did while they were working. Researchers estimate that expiration of the $600/week will result in large spending cuts with potentially negative effects on both households and macroeconomic activity. 
  • Stimulus in Focus: While congressional leaders from both parties privately believe they will reach a deal on a fifth coronavirus bill, it may take weeks of negotiations with a lot of headline volatility. Still, House Speaker Pelosi has signaled a willingness to compromise over the size of enhanced unemployment benefits. Relatedly, White House and Senate Republicans are developing plans to encourage schools to reopen by providing aid in fifth relief package. Washington Post is reporting the bill could include $50 billion -$100 billion for elementary and secondary schools, while another $20 billion -$30 billion could go to higher education.
  • Passive investments and concentration concerns: As we have discussed previously, the top 5 stocks in the S&P 500 (Facebook, Microsoft, Apple, Google and Amazon) make up over 22% of the index. This is the highest concentration seen in the index's history. With over 85% of Equity ETFs using market weight to determine composition and 50% of all equities in passive investments (i.e. ETFs), this is concerning. Many investors utilize passive investments as a low cost way to gain diversification, but, in fact, the concentration is causing more risk than investors realize.

Planning Idea for the Week...

  • How has the Coronavirus affected your health insurance? Three major things have happened in response to COVID-19 with health insurance:
    1. Eleven states have declared an open enrollment period for their ACA Marketplace exchange in light of the current COVID-19 situation to facilitate the newly uninsured in applying for coverage.
    2. Congress recently passed the Families First Coronavirus Response Act which requires the majority of private health insurance plans to cover testing for the coronavirus with no cost sharing during this emergency period.
    3. More than 60 million people are covered by Medicare and are at a greater risk of becoming seriously ill, if infected by COVID-19, an infectious respiratory disease. Currently, there is no known treatment for COVID-19 beyond treating the symptoms of the disease. Medicare has updated some requirements to help address this. 
  • Here are more details on these three changes. Feel free to reach out with any questions. 
 

Comments on the the recent historic rebound in the stock market...

Why Stocks Have Rebounded in the Face of Historic Unemployment? This question has been asked by many of our clients, and the apparent disconnect between the stock market and the broader economy has been a controversial topic – especially over the last few months. In his latest article, Baird Investment Strategy Analyst Ross Mayfield explores some of the factors behind the market’s recent surge.

 

A Comment from Maggie Price...
 

As many of you know I went to junior high, high school and university in South Central Montana.  My parents retired to a quiet little town at the foot hills of the Beartooth Mountains called Absarokee.  The town next door was a small place called Fishtail…My memory of this place is that it had an abandoned grain elevator and that’s it.  Several years ago we were on our way to a campground and it required us to go through Fishtail.  There were hundreds of people in town at an art show and wine tasting.  I couldn’t believe that this small town in the middle of nowhere had been transformed.  I soon learned about a couple that moved to the area and founded Tippet Rise Art Center.  Tickets to their concerts and events can only be obtained via lottery, but this year due to COVID we can all listen to the concerts online and tour, via pictures, the art installations on the prairie. Take a look: https://tippetrise.org/.

Good News From Around the World

 

  • Captain Sir Tom Moore has been knighted in the Queen's first official engagement in person since lockdown. The investiture to honour the 100-year-old, who raised more than £32m for NHS charities, was staged in a "unique ceremony" at Windsor Castle. He has been recognized for walking more than 100 laps of his garden in Marston Moretaine, Bedfordshire.
  • Researchers from the University of Houston have succeeded in collaboration to develop a “catch-and-kill” air filter that can trap COVID-19—and instantly kill it in the process. The study paves the way for preventing transmission of SARS-CoV-2 and other highly infectious airborne agents in closed environments. 
  • Spreading rock dust on farmland could suck billions of tons of carbon dioxide from the air every year, according to the first detailed global analysis of the technique. The rock dust approach, called enhanced rock weathering (ERW), has several advantages, the researchers say.Many farmers already add limestone dust to soils to reduce acidification, and adding other rock dust improves fertility and crop yields, meaning application could be routine and desirable.
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