There’s nothing like a central banker giving out a dose of reality to put markets back in check: That’s what we saw yesterday from Fed chairman Powell, who cast a fairly downbeat tone in the post rate meeting press conference yesterday, saying that the US faces a long road to recovery and though the economy would make great strides over the next year, it’s unlikely to get back to where it was on a productivity and employment perspective until after 2022, which dashes the hopes of those still clinging on to a V shaped recovery. The Fed don’t see interest rates in the US rising for the next couple of years either, which is something that most investors will at least draw comfort from.

The reaction in the markets was fairly textbook, with stocks moving lower, oil falling and bonds rising. However, the move lower in stock markets as a result wasn’t entirely universal, as the Nasdaq managed to stay above the 10,000 marker, which it crossed for the first time ever earlier in the week – with tech clearly something that we’ve come to rely on throughout all of this and are likely to continue to do so.  The Dollar traded a little stronger on the news than it had done earlier in the day, but the theme still continues to be weakness in the Greenback.

The Pound faced a few hurdles late in the day, mostly driven by the questions being raised over the government timing of the lockdown and whether it should have been sooner – with professor Neil Ferguson saying that locking down just one week earlier would have halved the death toll.  The PM has said making such a claim is premature and that he’s very proud of the coronavirus response, but despite the crisis still ongoing, there seems to be enough capacity in the opposition and other communities to want to get into the timeline of events and start the enquiry now, so we expect this sort of probing to continue and for Boris and his team to field some even more uncomfortable questions in the daily briefings, not to mention more uncomfortable encounters with the leader of the opposition at PMQ’s – where the lack of a crowd to cheer him on really does start to show the PM’s short comings in debate.

In the US, there’s concern over a second wave as LA county reports its highest death toll since mid-May and in Texas hospitalisations are increasing. In other pockets of the country the number of cases is increasing too, yet in Georgia where things opened up really early, cases have stayed pretty static. The confusion over what’s really going on can’t readily be answered and there is also concern that the wave of protests that the country has been facing will lead to further spikes in the numbers a few weeks down the line.

Trump is looking to get the presidential fountain pen out later this week and sign an executive order on policing overhauls. The legislation has been worked on quietly for the last week or so and is apparently not designed to replace legislation that republican senator Tim Scott is working on, but isn’t likely to go anywhere near as far as Democrat lawmakers want it to. Trump’s in bad need of some positive PR here and getting this done soon might actually get him some of that.  If you’re not happy with the bill, you can always go to a fundraising dinner that he’s holding… for a cool $580k two people get dinner and a photo with the president (the most expensive hamburger on record?)

A pretty short report today, so for further reading, take a look at this FT article. It argues that from a technology perspective, sometimes simple is far more valuable to humanity than complex. Additionally it talks a bout the need for governments to step up and throw many times more money at vaccination solutions for the virus – arguing that companies need to see the prize on offer to be able to justify ploughing billions into a project for more than just goodwill. Well worth a read if you can get past the paywall!

Today is quite quiet on  the data front, so we might see the market struggle to overcome the reality check it was dealt last night.

Be well

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