Weekly Analyst Update — June 29th

Sofie Hendrick
Jun 29 · 3 min read

Markets go Coronavirus Rollercoaster

  • Wall Street started the week higher, as the NSDQ100 reached a new all-time high on Tuesday and the SPX500 and DJ30 also registered gains.
  • However, as new coronavirus cases reached record highs in the US, markets took a step back on Wednesday, only to recover again on Thursday and fall once more on Friday.
  • From a macro standpoint, jobless claims in the US were down nearly 800k last week, falling below 20 million, which is overall positive for the economy.
  • The prospect of a second wave of infections is now testing investors’ mettle as there is no longer a quiet steady recovery.
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Oil Crossed $40 for the First Time Since March

  • Oil prices were bullish to start the week, climbing above $40 for the first time since March on Monday.
  • However, prices fell 6% on Wednesday on an increase in US crude oil supplies and fears of lower demand.
  • Several oil companies have said that they will cut their investments by a third in 2020 to cope with the collapse in crude oil prices. As a result, production will be lower than expected for a few years, which could potentially keep the oil market bullish for months.

US Banks Fail Stress Test

  • The Fed’s annual stress test showed that some major US banks may not cope well with coronavirus-related implications.
  • As a result, the Fed has said it will place a limit on share buyback programs and dividends.
  • In total, 33 of the country’s top lenders underwent stress tests and are now barred from share buybacks until at least Q4 this year.

Gold Nearing 8-Year High

  • Gold crossed its 7-year high this week and is close to its 8-year high.
  • This could be due to doubts about an economic recovery, and the fact that supranational institutions, such as IMF, OECD and the World Bank are lowering their GDP projections for 2020.
  • In addition, central banks have flooded markets with cash, debt in the US is rising exponentially and fears of a new trade war between the US and China linger.
  • These all put the safe-haven asset in high demand, and some say it could reach a new all-time high this year.
Delta has partnered with eToro to allow users to invest via an accredited and bespoke platform.

Hertz Stock Volatile on Bankruptcy

  • Hertz registered multiple double-digit swings this week, in both directions, on the company’s bankruptcy and rumours of it being acquired by competitors.
  • Hertz struggled because of the pandemic but there were deeper problems, which is why it has failed whilst some of its peers have managed to stay afloat.
  • Since the stock is cheap, clients buy it in droves, despite the company’s massive debt. However, the consensus among asset managers is that it is not investing anymore, but gambling.

The Week Ahead

  • Powell and Mnuchin to testify before the House Financial Services Committee (Tuesday).
  • NFP Report (Friday).

Written by a team of experienced financial analysts at eToro.

This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.

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