The grim milestones of 10 million global coronavirus cases and more than 500,000 deaths, along with spikes in various U.S. states, have not deterred investors on Monday.
US stocks rose in early trading, despite further indications that a second wave may be just around the corner. The Dow Jones Industrial Average DJIA,
rose 1% led by a rally on Boeing BA,
After the reports, US regulators are ready to begin flight testing of the grounded 737 MAX.
Of the 10 million cases worldwide, more than 2.5 million have come from the U.S., according to data from Johns Hopkins University. The United States also hit a daily record for new cases on Friday, reporting 44,000 new infections, and shutdown measures have been reinstated in Texas and Florida.
In our call of the day, Goldman Sachs strategists said the high volatility and low risk-adjusted returns will likely persist in the coming months. After last week’s 2.9% drop, they expected the S&P 500 SPX,
to end the year at 3,000 points, 0.3% lower than its closing price on Friday.
“The consensus expects a 9% rise in typical stocks in the next 12 months and volatility should remain high for the rest of the year, suggesting low risk-adjusted returns in the coming months.”
The investment bank’s portfolio strategy research team added 31 stocks to its basket with a high Sharpe index, which is now leaning toward healthcare, media, information technology services, and the aerospace and defense industries. The Sharpe index measures the risk-adjusted return on an investment, with a higher index that has a more attractive return once the risk is taken into account.
Goldman’s high Sharpe index basket has underperformed the S&P 500 so far this year at 591 basis points, which the team attributed to its penchant for value stocks. Historically, the basket has outperformed the S&P 500 in 66% of semi-annual periods since 1999 by an average of 271 basis points. The basket outperformed the index in May and early June, as economic data improved and value stocks rebounded, they said, but it has lagged behind since, as fears of a second wave have soared.
Following the rebalancing, Goldman said the basket offered prospective returns higher than the S&P 500. Western Digital WDC,
, Merck & Co MRK,
, Concho Resources CXO,
Philip Morris, International Prime Minister,
and Verizon Communications VZ,
They were among the new components with the highest ratio of expected return to six-month implied volatility. General Motors GM,
Comcast CMCSA
Mondelez MDLZ
and Coca-Cola KO,
they are among the existing members with the highest proportions.
The graphic
This chart from Fundstrat Global Advisors shows that, despite rising infection rates in the US and spikes in states such as Texas, Arizona, Florida, and California, daily deaths in the United States from COVID-19 have fallen to its lowest level since March.
Fundstrat COVID-19 monitoring project, Department of Health
The market
After the Dow closed 730.05 points, or 2.8%, lower on Friday, US stocks opened higher on Monday, despite fears of rising coronavirus case numbers. The S&P 500 rose 0.3%, but the Nasdaq Composite COMP,
fell 0.2% shortly after opening. European stocks were mixed in early operations as local outbreaks in the British city of Leicester and a Swiss nightclub raised concerns. The Stoxx 600 SXXP,
fell 0.1%, while the German DAX DAX,
rose 0.4%.
The buzz
Facebook CEO Mark Zuckerberg reportedly wanted to remove an incendiary post from then-candidate Donald Trump since 2015, The Washington Post reported Sunday. Instead, he was convinced to change the platform’s rules to allow such posts in the name of political disclosure.
The United States is unlikely to develop collective immunity against COVID-19 due to a likely partially effective vaccine and a large number of people who refuse to take it, said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, on Sunday.
Airbnb co-founder and CEO Brian Chesky warned that the trip “will never be the way it was before COVID” in an interview with Axios.
Britain’s top official and one of the government’s most powerful people, Sir Mark Sedwill, announced plans to step down on Sunday as Prime Minister Boris Johnson appears to be ready for a shake-up.
Random read
Son sails alone across the Atlantic to reach his 90-year-old father.
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