As coronavirus cases in October surged to end the month at 99,784, the financial markets paid little attention shedding only 1.96% for the month, shrugging off lockdown warnings from the UK, the Netherlands, Germany, Austria, Spain, Italy and Israel. As financial markets appear to be distracted by the election, at Samra Wealth Management we are deeply concerned about the upwards trend in new Covid-19 cases, of 120,504 (updated November 6th, 2020) that appear to be flying under the radar. This month we highlight factors that may significantly impact your portfolio.
In October we asked, “If a vaccine was available would you take it? Would you allow your children to take it?” Prior to answering, we ask you take the following factors into consideration:
There is an increased likelihood the administration of a covid-19 vaccine would require multiple doses.
A vaccine would require refrigerated storage and logistics capabilities, within a specific temperature range. Logistics capabilities at this point in time do not exist for effective wide-scale distribution.
FDA EUA (Emergency Use Authorization) would approve a vaccine for emergency use that may not have passed FDA approval under normal circumstances, where vaccines are tested on a larger population, with diversification in age, ethnicity and pre-existing conditions.
With the election behind us, we believe there is a heightened probability individual states are likely to mandate further lockdowns. In October’s issue of The Samra Report we shared unemployment figures reflect a state of recovery, we believe the structural changes made causing temporary unemployment, are likely to become permanent. The United States as well as other economies are in the midst of an economic revolution: concerts, professional sporting events and other large gatherings have more than close proximity in common. They support many other ancillary services including janitorial services, printing, tourism, food and beverage, as well as many others. Last month Goldman Sachs and J. P. Morgan announced they were preparing for their employees to return to their offices across the globe. However, days after returning to work, J. P. Morgan sent some employees home. Since October, a number of companies have followed suit,
As the election smoke clears, we expect an abundance of economic data to make headlines. Should the election outcome result in a new administration, we believe it is highly unlikely the Trump Administration will release a new stimulus bill. We caution investors that a second lockdown would not only impact hourly low-skilled positions as we saw earlier this year, a second lockdown would likely see a furlough of skilled employees. Removing non-essential salaried employees from private payrolls to that of government unemployment. In October Disney and major airline carriers announced layoffs, following trend in the last few days, ESPN, ExxonMobil, Chevron, Charles Schwab, Nike and Raytheon have announced plans to cut thousands of white-collar jobs. That's on top of major layoffs already announced or reported in the press at Wells Fargo, Goldman Sachs, Salesforce, Allstate and CNN owner WarnerMedia.
In our November 2019 issue of The Samra Report: “Winter is Coming” we stated: “consumption spending makes up 68% of the United States GDP equation, insinuating a reduction in wages translates to a reduction in economic output. Although economic data does little to support our view, we remind investors that economic data did little to predict the last financial crisis.” 2020 has shown a disconnect of epic proportion when comparing Unemployment (U-6) to the stock market (S&P 500). With stocks riding near all-time highs, investors may not be aware of what’s to come, however, corporations are taking measures to dampen the impact of a prolonged recession.
Disclosures:
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor. Investing involves risk including loss of principal. No investment strategy, such as rebalancing, can guarantee a profit or protect against loss. Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index.
References
Business Insider. 2020. The Coronavirus Outbreak Has Triggered Unprecedented Mass Layoffs And Furloughs. Here Are The Major Companies That Have Announced They Are Downsizing Their Workforces.. [online] Available at: <https://www.businessinsider.com/coronavirus-layoffs-furloughs-hospitality-service-travel-unemployment-2020#maersk-the-shipping-giant-announced-that-it-will-cut-at-least-2000-jobs-in-restructuring-on-october-13-in-september-the-company-said-that-up-to-27000-jobs-or-roughly-a-third-of-its-global-workforce-could-be-impacted-by-the-changes-1> [Accessed 30 October 2020].
Egan, M., 2020. From Exxon To Charles Schwab, White-Collar Job Cuts Are Mounting. [online] CNN. Available at: <https://www.cnn.com/2020/10/30/business/jobs-white-collar-layoffs/index.html> [Accessed 30 October 2020].
Fda.gov. 2020. Development And Licensure Of Vaccines To Prevent COVID-19 Guidance For Industry. [online] Available at: <https://www.fda.gov/media/139638/download> [Accessed 30 October 2020].
Nytimes.com. 2020. Covid In The U.S. Latest Case Count. [online] Available at: <https://www.nytimes.com/interactive/2020/us/coronavirus-us-cases.html> [Accessed 5 November 2020].
Samra, I., 2020. The Samra Report: Winter Is Here. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/winter-is-here> [Accessed 30 October 2020].
Samra, I., 2020. The Samra Report: Winter Is Coming. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/winter-is-coming> [Accessed 5 November 2020].
U.S. Food and Drug Administration. 2020. Emergency Use Authorization For Vaccines To Prevent COVID-19. [online] Available at: <https://www.fda.gov/regulatory-information/search-fda-guidance-documents/emergency-use-authorization-vaccines-prevent-covid-19> [Accessed 30 October 2020].
U.S. Food and Drug Administration. 2020. Pooled Sample Testing And Screening Testing For COVID-19. [online] Available at: <https://www.fda.gov/medical-devices/coronavirus-covid-19-and-medical-devices/pooled-sample-testing-and-screening-testing-covid-19#pooled> [Accessed 30 October 2020].