22 July - update from our investment partners
- 22nd July 2020
The gains in the US and Europe yesterday were led by the Energy and Bank sectors
What has happened
US markets crept into post pandemic highs yesterday despite a wobble at the end of the trading session. The gains in the US and Europe yesterday were led by the Energy and Bank sectors, in a slight reversal of the growth focused rally of recent weeks.
US Stimulus timeline squeezed
The slight question mark for risk appetite came from reports that Senate Majority Leader McConnell did not expect the new US stimulus package to get done in the next two weeks. This was the timeline initially flagged by the White House so any elongation is a disappointment to markets. In particular, Congress time is becoming limited as August approaches so there is some urgency to get a bill together that the House Democrats can agree to. The market has some concern that this may be kicked into the long grass despite a bipartisan agreement that some further stimulus is required at this point.
California overtakes New York
Meanwhile the viral numbers in the US continue to rise with California now having overtaken New York as the state with the most infections. Tuesday commonly sees weekend impacted figures so, as ever, needs to be taken with a pinch of salt, but there were further signs of new cases slowing in the US hot spot states. This is likely the lagged effect of new measures at a state level to control the virus and should, again with a lag, keep fatality rates under control over the short term. Yesterday Donald Trump restarted his coronavirus briefings saying however that things were likely to get worse before they get better.
What does Brooks Macdonald think
As the US case figures remain stubbornly high, the political pressure on a fiscal stimulus package increase. Any disagreement between the Democrats and Republicans is likely to focus on oversight and measures to ensure any unemployment support doesn’t disincentivise seeking new employment. Whilst there is common ground on the need for a package the amount of time for Congress to debate this package is shrinking. Thereby raising the risk of a rushed package which lacks the ambition and size of a more considered plan or indeed no near-term package at all.
Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.