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A Game Changer for Investors and the Economy?

A Game Changer for Investors and the Economy? 

Over the past 24-hours there has been a variety of new catching headlines resulting in a significant change of sentiment for investors.  We outline a few below.

The Promise of a Vaccine?

Moderna reported “positive” phase one results for a potential COVID-19 vaccine.  The company said that after two doses, all 45 trial participants had developed antibodies.  There are more tests and trails to come, and although a widely available vaccine is still very premature, this was promising news.  The hope of a vaccine was a primary reason for the market’s strong move today and a potential game charger for confidence of an economic re-opening.  (Source: CNBC)

Plenty of Liquidity Remaining 

Federal Reserve Chairman Jerome Powell was interviewed on CBS’ “60 Minutes” last night and said that “there’s a lot more we can do” to help the economy.  “We’ve done what we can as we go, but I will say that we’re not out of ammunition by a long shot.  No, there’s really no limit to what we can do with these lending programs.” He also said that he is “highly confident” that the U.S. economy will claw its way back from the current pullback but it may not fully recover until a COVID-19 vaccine is complete.  The Federal Reserve and Stimulus Plans from Congress has provided some stability to the markets during these difficult times and investors seem to believe that they will help keep the economy afloat until it reopens. 

Signs of a Pickup in Economic Activity

Several timely indicators have pointed to a pickup in economic activity, including higher credit and debit card spending and an increase in travelers based on TSA data.  The second quarter economic contractor could exceed 30% annualized, but reopening progress globally amid massive stimulus points to a potential strong rebound in the back half of the year. 

Our Market Thoughts 

The recovery in the stock market has baffled many strategists but as we say at Sandbox, you can’t ignore “price” as the market is a leading indicator. The significant sell-off was certainly a precursor to stay-at-home orders and a shutdown of the U.S. economy. The market recovery has priced in various liquidity back stops, Federal stimulus and now the hope for a sustained economic recovery. This can change quickly, but we have re-balancing into strength and have seen portfolios recover too.

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