Market Update: Thur, Jun 18, 2020 | LPL Financial Research


Stocks opened lower. The S&P 500 Index had its three-day win streak snapped yesterday, while the Nasdaq goes for its fifth straight gain today. This morning’s headlines continue to highlight the tug-of-war between rising COVID-19 cases and concerns stocks may be too far over their skis on one hand, and improving data, stimulus, and virus treatment prospects on the other. Asian markets were mixed overnight with slight gains in China and Taiwan; European markets were lower in midday trading.

Initial jobless claims missed. New unemployment claims declined for the 11th consecutive week but missed expectations. 1.5 million people filed new claims for unemployment insurance in the week ending June 13, above the consensus expectation of 1.2 million(FactSet). While the number of new claims is still over twice the pre-COVID historical high, the steady decline is encouraging and mirrors broad improvement across economic data as the economy reopens.

Record cash on the sidelines? One major trend we’ve noticed is a huge spike in money market mutual funds, as nearly a record $5 trillion (ICI) is now in cash. This is almost double the levels from five years ago and is significantly higher over the past few months. We take a look at this and two other interesting charts today on the LPL Research blog.

Relative valuations outside the US continue to fall. Relative to the S&P 500, the MSCI EAFE Index price to earnings ratio is 7 percentage points cheaper than its 10-year average, while the MSCI EM Index is 9 percentage points below its comparable metric. We continue to watch for better relative performance and more evidence of a durable global recovery before turning more positive on developed international equities, particularly Europe.

EM earnings estimates showing resilience, supporting our regional EM preference. Consensus 2020 earnings growth for the MSCI EM Index is -13%, compared with -28% for the MSCI EAFE (Source FactSet), while downward revisions year to date have been 5 percentage points less.

COVID-19 news. On Wednesday, new US daily cases rose 1.20%, up from 1.05% a week ago due to rising cases in the South, but tests rose 15.6% and the positive test rate remained stable at 4.9%. National hospitalizations rose for two straight days for the first time since mid-April. Reuters reported ICU beds are 83% occupied in Arizona, while hospitalizations in Texas have increased 66% since the end of May. A Chinese infectious disease expert declared Beijing’s latest outbreak contained (Source: COVID-19 Tracking Project).


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