Virus news pits optimism vs pessimism
Weekly Bond Commentary
Markets got a fresh taste of the coronavirus impact, both sweet and sour.
Monday morning brought news that a vaccine developed by Pfizer showed a 90% effectiveness, lighting a rocket under markets. The optimism this scientific breakthrough offered was immediately evident, but the cheer began to fade as surging infection rates were reported daily. The lack of finality from last week’s elections further unsettled markets, which tried to focus on the positives.
As if the politics of the country were not split down the middle enough, consumer outlook also differs by political party. The monthly University of Michigan consumer sentiment survey slid in early November. Respondents’ view of current conditions held steady, but their expectations dropped sharply. The survey indicated that Republicans have the least favorable economic expectations since Donald Trump was elected, while Democrats were slightly more upbeat.
Other economic data showed that the consumer is holding up surprisingly well. Weekly jobless claims eased lower, as did continuing jobless claims, but both remain high relative to pre-coronavirus levels. Real average hourly earnings rose around 3% over last year, and mortgage delinquencies and foreclosures both fell. Despite this relatively good news, the lack of a stimulus package to help battered small businesses and state and local governments continues to weigh on consumers.