The U.S. labor market brightened in July with its biggest increase in employment in almost a year, highlighting optimism about the economic recovery. The 943,000 jobs added mark a big step toward the Federal Reserve’s goal of “substantial” further progress justifying tapering of its economic supports. What positive news was in Friday’s report may be snuffed out entirely by the delta variant of the coronavirus, which threatens much of the progress made since the crisis began. There are about 31,000 new cases every day in the U.K., but that’s not stopping Prime Minister Boris Johnson from plowing full steam ahead with reopening. Singapore is also easing curbs. But in Melbourne, Australia’s second biggest city, a new lockdown is in place, its sixth since the crisis began. Florida is home to 6% of the U.S. population, but accounted for about 20% of its coronavirus cases in the past week. Covid-19 patients are filling the state’s intensive-care units, and as with India when it was crushed by the delta variant, the state is having a hard time getting enough oxygen to patients. Pfizer was out this week saying that the efficacy of its shots drop over time, implying that those who got vaccinated would need booster shots to remain protected. The World Health Organization immediately called for a ban on booster shots so as to free up as many doses as possible for the unvaccinated.
As investors, most would ask a fundamental question – What the *^*! is going on here?
Future Wealth’s View
In the U.S., while some persist in talking about the pandemic in the past tense, White House adviser Anthony Fauci sounded the alarm about a rising fifth wave of infections: U.S. cases could double in the next two weeks. Amazon and other large corporations announced that they will delay having employees back in the office until 2022. Travel is widely expected to be negatively impacted and any indication of a surge of infections amongst those who are vaccinated will kill the “reopening trade”.
In fact, while critics have taken to bashing Fed Chair Powell for not raising interest rates and curbing inflation, it is this fear of a recurrence in Covid cases among those who are vaccinated that is keeping the Fed from taking action. Of course, it is fully possible that we may navigate our way out of this crisis and inflation could still become a big problem down the road. But, we will have to cross that bridge at a later point.
In the meantime, sit tight and wade patiently through these rough waters. Trying to manipulate your portfolio to get the best returns during these turbulent times would be an effort in vain. Do not attempt it. Just ask Cathie Wood at ARK Investments, who has been in the news almost every week pumping her stock picks for the year – After phenomenal returns last year, her portfolio is trailing the S&P 500 thus far this year.