U.S. Equities Pull Back Slightly

Catch Up Quick

• COVID-19 hospitalizations in the U.S. reached a record high of 73K on Monday

• Trump requests Wisconsin recount, deposits $3M to challenge Biden victory

• Saudi Arabia’s wealth fund cut its U.S. stock holdings by $3B last quarter

• NYC will close schools for in-person learning to curb coronavirus outbreak

• Candy giant Mars is buying the maker of Kind Bars in a deal that reportedly values Kind North America at $5B

• WHO warns vaccine won’t help countries fend off current wave of infections

• The U.S. plans to withdraw more forces from Iraq and Afghanistan

• Amazon takes on pharmacies by selling medications online

• Airbnb filed for a $1B IPO set to price in December

• Tesla ($TSLA) will be added to the S&P 500

Wednesday Insight

• Bitcoin shot past $18K for the first time since December 2017—this rally appears to differ from the former, given the more stabilized nature of the price action and widespread corporate adoption and integration of crypto amongst popular fin-tech companies such as Square, PayPal, and Fidelity, to name a few

Thought of the Day

• Two programs passed by Congress earlier this year to expand and enhance unemployment insurance are set to expire at the end of 2020

• This is problematic; Deutsche Bank found that allowing the programs to lapse would reduce total income by ~$150B in the first quarter

• To add additional strain, the nationwide eviction moratorium, suspension of student debt, and extended tax breaks for businesses are also set to expire at year end

• On top of this, COVID-19 cases continue to skyrocket nationwide as colder temperatures set in, reportedly making it even easier for cases to spread

• Recently though, markets (which are forward looking), have rallied on recent vaccine news

• However, the need for further FDA approval, large scale production difficulties, and distribution challenges are all recovery hurdles that may be largely overlooked at the moment

• It's possible that the recent market rally is pricing in an irrationally over-exuberant recovery timeline that has catapulted equities, specifically those who are still financially insolvent or in dying industries, into overvaluation territory

• This increases the likelihood of a 3%-5% correction over the coming months as investors aim to reassess and rebalance their portfolios in preparation for the new year

The Bottom Lines

• With the level of recent volatility spawned by recovery news, it's always smart to look for and hold companies whose future success isn’t entirely predicated on a vaccine (or lack thereof)

• Allowing one to diversify away a portion of the unsystematic risk brought about by speculative recovery headlines, while still gaining access to broader upward market momentum

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