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Week ahead: Wall Street prepares for another rocky neighborhood

This is for good reason. Even if there are still a few days left, the S&P 500 could reach its best quarterly performance in 50 years, notes Bank of America in a note to customers.

But there are signs that Wall Street is covering its bets in the third quarter, looking more closely at the opportunities without assuming that everything continues to rise.

See here: Almost two out of three asset managers believe that Covid-19’s long-term impacts have not been sufficiently taken into account in the stock markets, according to a recent survey conducted by an institutional investor.

Defensive positioning is on the rise. For the week ending Wednesday, investors ̵

1; who are still sitting on a huge amount of liquidity – have pumped $ 2.9 billion in gold and withdrawn $ 7.2 billion from the shares, according to Bank of America. The flow of money to riskier bond funds has stabilized.

In addition, the Cboe Skew index – which tracks demand for options that would pay if the S&P 500 sees an unexpected sharp drop – has started to rise.

“We see no sign of complacency in the derivatives market,” UBS hedge fund chief investment officer Kevin Russell told reporters today.

Taken together, Wall Street appears to be taking a more cautious stance, driven more by the desire to seek agreements than by the frenetic “everything wins” strategy that defined spring.

The CNN Fear & Greed index, which follows the mood of the market, remains in “neutral” territory.

Russell said he had a feeling that the market is “conservative” and “eager for prospects”. But that doesn’t mean that all risks have a full price.

This is especially true when it comes to soaring coronavirus infections that could trigger a new round of arrests. The S&P 500 fell 2.4% on Friday after Texas set new bar and restaurant restrictions in a spike in cases.

Remember: JPMorgan acknowledged in a note to customers on June 19 that it is not “adequately covered” against a second wave of infections that triggers blockages.

“We believe that hospital capacity is sufficient to cope with the inevitable increase in infections as mobility increases,” said the bank.

The image of the works is improving, but it is still obscure

The main event ahead of the July 4th holidays is the U.S. employment report for June. Wall Street expects another solid demonstration, but after May data shocked meteorologists, confidence in analyst estimates is waning.

Economists interviewed by Refinitiv expect to learn that the US economy added 3 million jobs in June, bringing the unemployment rate to 12.3%. It would be a positive sign that the U.S. economy continues to recover as the laid-off employees return to work.

There are a few caveats, however. Investors don’t really know what to expect after the U.S. government said jobs rose 2.5 million in May when they expected a 7.5 million drop.

Economists have started to rely more on non-traditional data, such as restaurant reservations registered through OpenTable, but extrapolating too much from that information is difficult.

And even if the US economy added 5 million jobs in June, as Capital Economics predicts, it would be too early to celebrate. Employment would still be below 10% below February levels, economist Micheal Pearce said in a recent note to customers.

Investors are desperate for some good economic data as infections grow in many parts of the country, although the June report will not reveal much about how the job market could be affected by the current wave of cases.

On Friday, the Bureau of Economic Analysis reported that consumer spending rebounded in May, but Americans’ income dropped sharply when government payments declined. This long-term is bad for the consumer-led American economy.

In addition, the University of Michigan reported that consumer sentiment slipped in the second half of June, in sync with a resurgence of Covid-19 cases in parts of the country.

Come on next

Monday: ongoing home sales in the United States; Business confidence in Europe

Tuesday: consumer confidence in the United States; Production data in China; Japanese unemployment; FedEx (FDX) earnings
Wednesday: ADP private employment report; Unemployment in Germany; ISM Manufacturing Index; General mills (GIS) earnings

Thursday: US employment report; Unemployment in Spain and Italy; Weekly unemployment claims in the United States

Friday: U.S. markets closed

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