DDI Markets & Economy Newsletter | Week of August 17 | Together With Alpha Trades
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Last order of business: We’re breaking the Markets & Economy issue of the newsletter into two because there’s just so much happening! Watch your inbox on Mondays and Thursdays for future stuff from DDI.
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DDI Writer Highlights
Each issue we like to start by showcasing a few thought-provoking stories from the DDI community. Want your story featured? Submit your best here.
Stock Donations: What To Know By Alex Chung
The Irrationality Behind Rationality By Shereein Saraf
Money: Investing During the Coronavirus Pandemic By Ken Poirot
If Capitalism is a Failure, Then What is the Alternative? By Adam Tabriz, MD
Fear & Greed Index: [69: Greed] (as of Aug 17, 2020)
The S&P 500 closed the week just shy of a record closing high. Precious metals, which have performed well against economic uncertainty in the US and abroad, had a sell-off. Gold enjoyed a brief time above $2000. The real yield for US 10-year Treasuries slipped into the negative, putting pressure on the US Dollar Index (DXY).
Tesla (TSLA) announced a 5–1 stock split, which should be a boon for Robinhood retail traders looking for cheaper entry. Robinhood is crushing the competition, seeing 4.3 million daily average revenue trades (DARTs) in June 2020, and adding more than 3 million accounts to the brokerage platform.
A trillion-dollar disagreement | The fifth Coronavirus relief package may be weeks away, with leaders unable to find a compromise. “We are miles apart in our values,” Nancy Pelosi told reporters on Thursday after negotiations broke down.
Main Street feels the burn | Consumer price inflation hasn’t been this high in more than 29 years. Still, with 31.3 million people on unemployment benefits, inflation experienced by the average person will likely remain in check. That said, there are small signs of recovery. Jobless claims fall below 1 million for the first time in nearly five months, and retail sales continue a steady climb.
Greener pastures | Americans continue to abandon expensive parts of the country like Manhattan, NYC to distant suburbs.
The big picture | The Fed is going easy on purchasing corporate bonds. However, the balance sheet still sits at a dizzying $6.9 trillion. With US debt approaching $27 trillion and set to surpass $78 trillion by 2028, and the wealth gap already drastically widening, there’s a lot at stake for the next Presidential election cycle.
Global infections have reached 20 million, while the US reached 5 million coronavirus cases as new cases are beginning to level off. Some parts of the country are giving the green light for schools to hold in-person classes.
The UK signed deals for another 90 million doses of COVID-19 vaccine from Novavax (NVAX) and Johnson & Johnson (JNJ), topping off the UK’s stockpile at 340 million.
This week’s elephant in the room is Russia, where Putin announced the country has developed the first COVID vaccine, dubbed the meme-worthy name Sputnik-V.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, expressed dire concerns. “Having a vaccine and proving that a vaccine is safe and effective are two different things,” Dr. Fauci told the press.
Tencent saw quarterly profits increase 37% on the back of a video gaming boom. This news is at the end of President Trump issuing an executive order to ban business transactions in the US with Tencent’s social media company, WeChat. Tencent appears undeterred, the company’s chief strategist James Mitchell stating, “The US represents less than two percent of our overall revenue.”
More than one dozen US companies, including Apple, Walmart, Disney, and Ford, lobbied the White House over the WeChat ban.
Retaliations | Arrests of academics and journalists in Hong Kong have ramped up under China’s national security law, prominent media tycoon Jimmy Lai being among them.
China announced it would sanction 11 American officials, including Senators Marco Rubio and Ted Cruz. The move is in response to the US recently placing sanctions on 11 Chinese officials in Hong Kong. Among the list is Chief Executive Carrie Lam, on the grounds of damaging political freedoms in Hong Kong.
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In Other News
Enter Kamala Harris | Joe Biden announced Senator Kamala Harris as his running mate for the 2020 presidential election. She is the first black woman and the first person of Asian descent ever added by a major political party to a presidential ticket. On Kamala’s to-do list would be advocacy for student loan forgiveness, affordable housing, medicare, and an amendment to the Fair Credit Reporting Act.
A landmark event in the Middle East | Israel and the United Arab Emirates have agreed to normalize peace agreements. President Trump called it a “huge breakthrough.”
The Last Mile | The largest US mall owner Simon Property Group is in negotiations with Amazon about transforming anchor stores, such as Sears and JCPenney, into Amazon fulfillment centers.
Amazon aims to close the “last mile” of their delivery process to residential areas when COVID has everyone cooped up indoors, turning toward e-commerce. Buying up or renting empty mall and department store space is the perfect real estate arbitrage for the e-commerce giant.
Against the grain | AirBnB plans to file for an IPO this month, despite a 67% drop in quarterly revenue.
The American Midwest is reeling | A storm with winds up to 112 miles per hour destroyed farmland in Iowa, bursting grain bins containing millions of bushels from the previous year’s harvest. The storm left more than 600,000 residents without power.
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