Global stocks took a breather this week as gridlocked fiscal stimulus discussions outweighed relatively positive developments on the vaccine front. Congress successfully passed a stopgap spending bill, which will allow more time to negotiate the relief package, but the timing of any such deal is highly uncertain. Most risk assets were down as investors sought safety in bonds and gold.
Weekly Returns
S&P 500: 3,663 (-1.0%)
FTSE All-World ex-US (VEU): (-0.4%)
US 10 Year Treasury Yield: 0.90% (-0.07%)
Gold: $1,843 (+0.2%)
EUR/USD: $1.212 (0.0%)
Major Events
- Monday – California water futures began trading on Wall Street.
- Tuesday – The United Kingdom became the first Western country to start vaccinating its citizens with the COVID-19 vaccine from Pfizer and BioNTech.
- Wednesday – Canada became the second country behind the U.K. to authorize use of the Pfizer vaccine.
- Wednesday – DoorDash opened 78% higher than its IPO price in its first day of trading, valuing the company at almost $40 billion.
- Wednesday – The Federal Trade Commission, along with 46 states, filed an antitrust lawsuit against Facebook claiming the firm engaged in monopolistic and anticompetitive behavior.
- Thursday – New data from the Labor Department showed an increase in weekly jobless claims as new lockdown measures took effect.
- Thursday – The ECB expanded its stimulus program by boosting bond purchases and offering low-cost loans to banks.
- Thursday – Airbnb more than doubled its IPO price in its first day of trading, ending the day worth more than $100 billion.
- Friday – New York announced it will close indoor dining amidst increasing COVID-19 cases.
- Friday – Senate lawmakers approved a stopgap measure funding the government for one week and avoiding a shutdown.
Our Take
The long-awaited vaccine became reality this week, with the U.K. and Canada both authorizing its use and starting to vaccinate citizens. First across the line was the version from Pfizer and BioNTech, which is expected to also get FDA approval at any moment. Moreover, the equally effective version from Moderna is close behind, with approval potentially expected in the next several weeks. All of this means select groups of U.S. citizens could start receiving shots within days.
That’s good news, although this week’s sharp uptick in unemployment claims was a reminder that more economic pain lies ahead. This is primarily the result of recent lockdown measures, which are likely to persist for several months as COVID-19 cases hit daily records. All of this has brought fiscal stimulus negotiations back into focus, where this week’s lack of progress put downward pressure on stocks. This could certainly remain a source of near-term volatility, but we believe a compromise will eventually be reached with both sides interested in a deal.
Either way, markets appear to be taking a longer-term outlook with global equities trading near all-time highs. Many expect a return to normalcy by mid next year, so perhaps it is this timeline that poses the bigger threat to equity valuations. In order to hit that target, both the production and distribution of any approved vaccine needs to be relatively flawless. This is far from certain. More importantly, people need to take it.
