Written by Michael Forrester – Founder, President, and CIO of High Note Wealth
It’s Fri-YAY, all! While it seems that every part of the country is setting June temperature records, the markets are more warm than hot – call it mild. The week itself was the “worst” since October if you’re of the “glass half empty” mindset. Alternatively, the U.S. market is barely off all-time highs for those of us in the “glass half full” game.
Trading volume, or the amount of market activity, is always the issue in the summer months. It’s low, so let’s call it normal (those houses in the Hamptons don’t occupy themselves). With the lower volume, it doesn’t take as much to move the stock market, so larger moves can occur without telling us as much as when volume is higher. Or you can get this saggy, sideways move where stocks will drift up or down with little notice. For those of us who are active and alert, this can provide an opportunity to take advantage of what’s given.
The move we are still waiting on is the much-discussed Taper Tantrum which some version of may have kicked off. Because it has been such a hot topic, it would make sense that it turns out to be a whole-lot-of-nothing when looking in the rearview mirror. The Fed has yet to formally announce their plans to ease the current stimulus, but 63% of global fund managers surveyed expect them to do so in August/September. So yes, there are even polls of guesses as to when the Fed will make an announcement in this business. If 63% of managers are predicting anything, you can be sure that the information is baked in.
One ingredient that’s recently been left out of the mixing bowl is a COVID relapse or drag of some variety. It’s not a topic that is getting a lot of play because honestly the word COVID itself is exhausting to type at this point. Couple that with the U.S. zooming ahead of most of the world in terms of vaccinations and there is very little discussion of the global markets slogging along or unable to fully recover. It’s worth keeping an eye on as the lack of consideration for such a scenario could be interpreted as a “surprise.” And we know the market likes surprises about as much as a toddler likes meditation. No reason for concern or action at this time, we just like to share things we are monitoring.
While we are on the topic of the dreaded “c” word, let’s make a stop in COVID Corner:
Call it a mixed bag or a collection of positives and negatives, there are endless anecdotes of where exactly the world is in terms of recovery.
- NYC Subs: On Wednesday, NYC had the most daily riders reported since the pandemic started. A solid number for sure but it’s still just 44% of what ridership was before the pandemic. We know there are significant structural changes to employees working from home and how business gets done, so maybe the max new number is 80% of what it once was. A lot of the big Wall Street firms have said they want workers back in the office this summer, so it will be an interesting number to revisit in September.
- Air New Zealand: Feeling particularly vulnerable to a widespread outbreak, the island country has been very aggressive in limiting travel and keeping their boarder closed. While they have opened some travel routes the majority remain closed as they have new concerns about the Delta variant of COVID-19. The airline this week gave guidance that they don’t expect “meaningful recovery” in 2022.
- Open For Small Business? As much as it seems at times that huge corporations dominate the landscape, there is no denying that small business is still the heart of the American economy. We know that the pandemic took a toll, but the data is always a struggle given the nature of the way small business is tracked. On June 1st, Vice President Harris indicated that “one-third” of small businesses were permanently gone. Exactly what data she was referencing is undetermined, but if it’s even close to that amount it’s a lot. Here’s an article that tries to fact check the claim which isn’t definitive, but the number seems close. The article also points to indications that the fallout wasn’t as bad as first anticipated, but then goes on to admit that they are not able to consider the estimated 26M single-operated businesses that don’t report employees. So…TBD.
- Delta Force Variant: It’s hard to keep track of the alphabet soup of COVID variants we have seen in the past year. The good news has been that none of the variants have been vaccination resistant. This new variant we call “Delta” seems to spread much faster and is potentially more fatal. It’s the version that was first discovered in India, but has quickly traveled around the globe. While this doesn’t pose a risk for those vaccinated, the concern comes from the lack of vaccines administered in foreign countries allowing it to bounce around and do its thing of mutating. Large countries like India, Brazil and Mexico are still way behind on vaccinations as a percentage of the population, so the virus has a playground. Could a new variant develop that results in all of us back in Zoom-only happy hours? Hard to say, but as we said above this isn’t something that is being discussed in financial circles.
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