EQWL

European bond prices have an unmistakable correlation to European COVID infections.The strategy of ensuring the banking system remains well capitalized - while letting market-based finance run wild - may have plausible theoretical underpinnings.The "penalty rate" issue is key to mitigating moral hazard.

There are continuing political and pandemic stories that could dominate the news cycle at any time.Many of the normal economic indicators are not helpful in the wake of the COVID lockdown decline.Retail sales improved 1.9% in September, beating expectations of a 0.6% gain and August’s 0.6% increase.Initial jobless claims increased to 898K versus expectations of 830K and the prior week’s 845K.Technical measures are reasonably strong. Trends remain intact and support levels have generally not been violated.

With the release of industrial production figures today, the deceleration in economic activity continues, according to some key indicators noted by the NBER's Business Cycle Dating Committee.Industrial production fell -0.6% m/m vs. Bloomberg consensus of +0.5%.The series was revised upward in August, so the level of industrial production was still higher than the earlier estimate for August.

This seems an opportune time to review the difference between strategy and tactics.The US dollar remains in a short-term downtrend; however, the rate of change has stalled over the last two months.Growth continues to outperform, but the tide may be turning.A weak dollar environment should, theoretically, favor international over US stocks.Small company stocks are one of the few areas where we see some of the recent extreme being corrected.

While most people generally understand that the stock market and the economy do not move in lockstep, there is still an underlying belief that a strong market reflects a strong economy.With the Fed now delivering more stimulus than ever, and promising to keep interest rates at zero for as far as the eye can see, many attribute the surprising rally to a "never fight the Fed" bias, which has banished investor fears through the assumption that the Fed will vanquish every dip with even more stimulus.As the "Main Street" economy continues to languish, the Fed will continue the funding available for large businesses to borrow cheaply even while the pain for small businesses persists.Dollar weakness in recent months have many in the mainstream finally convinced that a reckoning is at hand. Buckle up.

We focus on the UK to illustrate the dynamics of the three signposts we use in evaluating the virus shock: restart, policy revolution and economic scarring.Talks around a pre-election U.S. fiscal package continued in fits and starts - though the path to enactment of any deal appears very narrow.The International Monetary Fund may increase its global growth forecasts this week, from more bearish earlier predictions.

With a gain of over 3% today, the Nasdaq is doing what it always does on Mondays – rally!Year to date, the Nasdaq is up an impressive 32.7%, putting it on pace for the first back-to-back annual gain of over 30% since 1998 and 1999.Even crazier, though, is the fact that the Nasdaq is up over 20% year-to-date on Mondays alone!

The S&P 500 closed the trading week ending Friday, 9 October 2020 at 3,477.13. That falls within three percent of its 3 September 2020 all-time record high close of 3,580.84.The index rose, fell, and rose again with the prospects for another round of fiscal coronavirus stimulus coming from the U.S. government during the week.As a general rule, political events may contribute noise to the markets, but until major changes in tax rates become an immediate concern affecting investor expectations for the future, they won't contribute more than day-to-day noise to the S&P 500.