Monday, July 27, 2020

Busy Economic Landscape

Monday, July 27, 2020 – Stocks edged lower and long-term bond yields sunk to near record lows, as mounting economic and geopolitical worries spurred a broad risk-off rally this week. Sentiment was initially buoyed by a series of positive developments, namely a rebound in existing home sales, encouraging vaccine trial results and a historic EU fiscal stimulus program that will bring the member countries towards their deepest level of economic cooperation ever. Yet, this encouraging news, that briefly sent the S&P 500 into positive territory for 2020, was summarily snapped towards the end of the week.

On the economic front, U.S. initial jobless claims rose last week for the first time since March, raising fears that the emerging economic recovery could be in peril. These economic concerns were compounded by uncertainty over the renewal of U.S. fiscal stimulus, which has been integral to the stabilization and subsequent economic rebound since the rapid plummet towards recession in March. Critical relief measures from Congress's initial stimulus package, including unemployment benefits, small business loans, mortgage and rental forbearances are set to expire at the end of the July. With the coronavirus pandemic showing no signs of abating, the failure to extend these benefits could have a devastating impact on our economic rebound and general consumer sentiment. Adding to the downward pressure on market sentiment was the tit-for-tat closures of consulates in the U.S. and China. This follows a pattern of sharpening U.S.-Sino tensions, which raises another obstacle to the global economic recovery.

For the week, the DJIA, S&P, and Nasdaq shed 0.8%, 0.3%, and 1.3% respectively. This snapped two and three week winning streaks for the DJIA and S&P 500. Underscoring this week's risk-off rally, the U.S. 10 Treasury dropped to 0.58% and gold rose to a new record price of $1,897.50 a troy ounce.

ETFG Weekly Select List - The five most highly rated ETFs per Sector, Geographic Region and Strategy as ranked by the ETFG Quant model.

Given that the development of a COVID-19 vaccine currently wields an outsize influence on market sentiment, we'd like to highlight ETFs from the health care sector that our model currently favors. The following five 5, ranked 1-5 according to our model, could offer upside exposure towards COVID-19 therapeutics and vaccine progress - SPDR S&P Biotech ETF (XBI), Loncar Cancer Immunotherapy ETF (CNCR), iShares Nasdaq Biotechnology ETF (IBB), VanEck Vectors Biotech ETF (BBH), and VanEck Vectors Pharmaceutical ETF (PPH).

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