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June 27, 2020, 7:51 a.m. EDT

Why one strategist is actually encouraged by a spike in new U.S. coronavirus cases

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By Steve Goldstein, MarketWatch


Getty Images
Beachgoers enjoy the sunshine as they sunbathe and play in the sea on Bournemouth beach in southern England on June 25, 2020.

It is just the nature of the market that the coronavirus pandemic has forced every fund manager and analyst to become an amateur epidemiologist.

So here are some of the COVID-19 thoughts of Christopher Wood, global head of equity strategy at Jefferies. He is actually encouraged by the latest week of coronavirus data that has seen cases spike outside of the New York metropolitan area.

He notes, for example, the median age of new positive cases in Florida has declined from 50 in April to 33 in recent days, and that, crucially, deaths are declining even as new cases pile up. Besides the point that new cases are being detected more because testing has increased, and that younger and healthier people are getting the disease, Wood raises the possibility that, like severe acute respiratory syndrome, COVID-19 could simply burn itself out as it mutates into a less virulent form over time.

“If such is indeed the case, it is extremely bullish. Investors should certainly keep an open mind on such a possibility,” Wood says. More good news on the coronavirus front comes from Western Europe, as new cases and deaths, outside of the U.K., are roughly 90% lower eight weeks into reopening.

Wood recommends a barbell strategy of owning both growth and value stocks. Growth stocks have outperformed of late because of second-wave concerns, while value stocks should rally when V-shaped recovery talk hits the market, he says. A renewed move in cyclicals should also lead to renewed outperformance by Europe and Japan, given the greater cyclical gearing of their indexes, he adds.

If he’s wrong about the virus, Wood still doesn’t think widespread shutdowns will result. That point was reinforced by President Donald Trump himself in a tweet , who said the U.S. economy won’t be shut down again.

The buzz

Personal income slumped 4.2% in May — the federal government’s $1,200 checks were mostly sent out in April — while consumption shot up 8.2%, the Commerce Department reported. The personal savings rate fell to a still high 23.2% from 32.2%.

Friday is the annual reconstitution day for the Russell stock-market indexes and typically is one of the highest volume days for the year.

After conducting stress tests on big banks, the Federal Reserve said it is requiring large lenders to preserve capital by suspending share repurchases — 70% of payouts in recent years — and it is also capping dividend payments. Bank stocks had rallied on Thursday on a loosening of restrictions.

Related : The Federal Reserve’s bank stress tests put dividend payments at risk

E-commerce giant Amazon /zigman2/quotes/210331248/composite AMZN -0.61%  is going to announce the purchase of self-driving car developer Zoox, according to reports in The Information and the Financial Times. The FT report put the price tag at $1.2 billion.

Cannae Holdings /zigman2/quotes/200232147/composite CNNE +0.24%  and Senator Investment Group said they’re offering $65 per share in cash for the 85% they don’t already own in CoreLogic /zigman2/quotes/210311059/composite CLGX -1.38%  , the real estate data and analytics company.

Apparel maker Nike /zigman2/quotes/203439053/composite NKE +3.49%  swung to a fiscal fourth-quarter loss on a 38% revenue fall. Close-out retailer Big Lots /zigman2/quotes/202923245/composite BIG +6.23%   said sales were well ahead of expectations.

/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,148.16
-19.30 -0.61%
Volume: 3.17M
Aug. 10, 2020 4:00p
P/E Ratio
121.01
Dividend Yield
N/A
Market Cap
$1586.55 billion
Rev. per Employee
$359,671
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/zigman2/quotes/200232147/composite
US : U.S.: NYSE
$ 38.08
+0.09 +0.24%
Volume: 563,183
Aug. 10, 2020 4:00p
P/E Ratio
2.55
Dividend Yield
N/A
Market Cap
$3.42 billion
Rev. per Employee
$45,425
loading...
/zigman2/quotes/210311059/composite
US : U.S.: NYSE
$ 67.05
-0.94 -1.38%
Volume: 950,128
Aug. 10, 2020 4:00p
P/E Ratio
36.99
Dividend Yield
1.97%
Market Cap
$5.40 billion
Rev. per Employee
$308,341
loading...
/zigman2/quotes/203439053/composite
US : U.S.: NYSE
$ 105.41
+3.55 +3.49%
Volume: 12.68M
Aug. 10, 2020 4:00p
P/E Ratio
66.74
Dividend Yield
0.93%
Market Cap
$158.89 billion
Rev. per Employee
$529,466
loading...
/zigman2/quotes/202923245/composite
US : U.S.: NYSE
$ 48.28
+2.83 +6.23%
Volume: 1.32M
Aug. 10, 2020 4:00p
P/E Ratio
6.84
Dividend Yield
2.49%
Market Cap
$1.78 billion
Rev. per Employee
$150,520
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