The market is pulling back, but my take is that it is no more than a technical pullback that should be shallow and should be bought into. Amazon broke out from a nine-month base and should be moving higher, and this should push the FAANG stocks even higher. Bond yields have dropped, and the reopening trade is starting to slow a bit, but we see little reason for concern because the cash on the sidelines is very large. There are lots of job openings, but there are still a lot of people reluctant to go back to work. This should start to work its way out with federal assistance coming to a halt in September.
Steven Meyer, our top research analyst, wrote this week:
Cases seem to be trending up, but deaths seem to remain in a downward trend. Will we see a trend reversal in Covid-related deaths due to the recent uptick in cases?
Are enough people vaccinated to avoid future shutdowns/economic restrictions?
The Delta Variant, first identified in India, is a variant of concern. That is, a variant for which there is evidence of an increase in transmissibility, more severe disease (e.g., increased hospitalizations or deaths), significant reduction in neutralization by antibodies generated during previous infection or vaccination, reduced effectiveness of treatments or vaccines, or diagnostic detection failures.
The United States has made tremendous progress in the fight against COVID-19. As of July 1, 54.6% of the U.S. population had received at least one dose of a COVID-19 vaccine. At the same time, work remains to be done to reach freedom from the virus. COVID-19 cases are increasing in some parts of the country, and on June 23, 2021, the United States surpassed 600,000 total deaths from COVID-19.
Additionally, vaccination rates among people ages 18-29 remain low, and a recent CDC report showed intent to get vaccinated was lowest among adults ages 18-39. Unvaccinated people are at serious risk of getting the virus and spreading it to others.