New home sales have ‘exploded’ back up to pre-pandemic levels. Mortgage rates have fallen yet again to record lows. The Fed stimulus is working. But there is only so much a central bank can do in the face of a second wave. Covid-19 infections remain on an upward trajectory in the US. More states have re-entered lockdown.
Daily new cases of the Covid-19 virus rose to a new high yesterday (78,009, July 24th). The number of deaths in the US remains well down from the highs (2,748, April 21st). Markets are not sentimental: a second wave may only become an issue for investors if fatalities start to approach the levels recorded in the spring. So far, despite the customary three week lag (between infections and fatalities), the trajectory in Covid-19 related deaths remains ‘relatively’ low. New treatments (e.g. controlling glucose) have improved the chances of survival for seriously ill patients.
Nevertheless, the Household Pulse Survey published by the Census Bureau showed a big drop in employment last week (see chart). The stock market showed some sign of responding on Friday, with the S&P 500 falling 0.65%. The IT index fell heavily after Intel spooked markets. There is a secular case for owning technology companies. But an uncontrolled second wave (for Covid-19 infections) is bound to shake sentiment, whatever the arguments in favour of IT – remote working, online retail, digitalisation of services etc.
Summary
• Rising job losses are a concern
• Intel jolts, but no longer a bellwether
• Tesla, a pause
