Forefront’s Monday Market Update

Don’t let emotions drive the bus!

I have had an increasing number of conversations with many of my clients who are asking about adding risk to their portfolios, and purchasing securities trading at increased, and unrealistic valuations. This isn’t surprising and a classic case of risk compensation.

Risk compensation is a theory that people will adjust their behavior in response to the perceived level of risk, becoming less careful if they feel more protected. IE: Driving faster when wearing a seatbelt, or increasing portfolio risk during a global pandemic, because a few companies are carrying the indexes higher. This is something to keep in mind as we navigate the remainder of 2020.

What is the Covid-19 data telling us?

On Tuesday of last week, drug company Moderna, released positive results in their early- stage Covid-19 vaccination study helping boost the market. Take a look at the chart below for the most up to date Covid-19 key metric readings.

Pay close attention to daily deaths, and Rt, as those are the two most important pieces of statistical data about Covid-19.

  • Are more people dying?
    • Yes. Daily deaths have increased, following the trend of increased hospitalization data.
  • If R is below 1 that means for every person who has the virus, they will infect less than 1 person. This means the virus will die out. Over 1 means the virus will spread.

values for rt graph

Rt broken down by state. For an interactive chart and source go here.

nationwide covid19 metrics

Banks, Banks, Banks

As Covid-19 data continues to trend negatively the markets and economy press on. Last week we got earnings from JP Morgan, Citi, and Wells Fargo amongst others with all three setting aside billions more in anticipation of eventual credit losses. Credit losses is bank speak for people not being able to pay their mortgage, and credit card bills.

Planning for a rainy day is smart, but if that day comes what does it mean for the markets?

What to look forward to this week

We have a light week in terms of economic data, but earnings season is getting into full swing. Look for initial and continuing jobless claims on Thursday morning, and check out the graphic below to see the most anticipated earnings of this week.

anticipated earnings releases  chart

Don’t forget to check out last weeks episode of Forefront’s Friday Fun, and remember “its personal, not just business.”

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