As the Dow continues its recovery, the NASDAQ hits a new record, and the S&P 500 continues to recover its pandemic-prompted losses, the coronavirus pandemic continues to cast a shadow over the U.S. equity markets. Flare-ups of COVID-19 continue to inject negativity after an unprecedented market rebound from the March 2020.
Market analysts hope for a virus cure and see a second government stimulus package as the best hopes for overcoming the current volatility on Wall Street. That volatility is a result of a recent stream of bad news as the country experiences new pandemic flareups and a rise in hospitalizations and deaths throughout the southern and western U.S.
The outbreaks have threatened to reverse hopes that those states can open their frozen economies. For example, Florida and Texas are either banning or restricting the consumption of alcohol in its bars. In fact, Texas closed its bars and strictly limited restaurant capacity. Texas Governor Abbot also restricted some outdoor activities like tubing and rafting.
As many market analysts have been forced to take on the role of amateur epidemiologists, Christopher Wood, global head of equity strategy at Jefferies, according to this Market Watch piece “is actually encouraged by the latest week of coronavirus data that has seen cases spike outside the New York metropolitan area.
Wood cites the lower median age of new positive coronavirus cases in Florida that has gone from 50 years to 33 recently. As new cases pile up, deaths are declining. This is because of more testing. Also, as younger and healthier people are infected, COVID-19, like severe acute respiratory syndrome, could burn itself out “as it mutates into a less virulent form over time.”
Wood encourages investors to keep an eye on the coronavirus numbers and be ready to join the bulls. In further support of his optimism, in Western Europe new cases and deaths (outside the U.K.) are 90% lower. Wood acknowledges that he could be wrong, but he doesn’t believe that widespread economic shutdowns are on the horizon.
Meanwhile, as COVID relief bill negotiations remain stalled, one Democrat Representative from New York, Tom Suozzi, wants to repeal the $10,000 cap on New York state and local tax deductions as part of the coronavirus relief package. The cap was imposed in the 2017 Trump Administration tax bill. Before the legislation, high income residents could deduct their state tax payments from their federal income tax bills.
Suoizzi wants to restorer that tax break: “We’re losing taxpayers when we need them most,” he said. “The people who can’t afford to move or just don’t want to move are the ones left behind holding the bag.”
Senate Republicans mocked the proposal as an ironic Democrat effort to give a tax cut to the rich.
“The Democratic leader is still refusing to let struggling Americans get another dime unless he gets a massive tax cut for wealthy people in blue states that has nothing to do with the coronavirus,” Senate Majority Leader Mitch McConnell said of Senator Chuck Schumer.
White House officials, according to insider Rep. Greg Steube, R-Fla., as of Wednesday, August 5, were still “very far apart” on the next coronavirus stimulus package.
