Financial Markets Report

June 24, 2020

As the Fed (and other central banks around the world) add trillions and trillions to their balance sheets to overcome the negative economic effects of Covid19 . . .

. . . gold (GLD) breaks to the upside after trending sideways for a few weeks.

The recent unprecedented monetary policy is also helping Nasdaq (QQQ) lead U.S. (SPY & DIA) & international developed markets (EWJ, IEV, & EPP) higher as investors pile into technology companies.

Technology (VGT), consumer discretionary (VCR) and healthcare (VHT) sectors continue to lead U.S. equities higher. Financials (VFH) and Energy (VDE) are the biggest laggers.

Emerging Market E-Commerce (EMQQ), software (IGV), gold miners (GDX), and bio-tech (BBH) are the strongest sub-sectors. Aerospace/defense (ITA), and US oil equip & svcs (IEZ), and US regional banks (IAT) are the biggest laggers.

Nasdaq (QQQ) and China (PGJ) continue to lead global equities. Brazil (EWZ), while hit hard in March, is now starting to push higher.

Unemployment hits historical highs at 13.3%.

10-year US treasury also remains at historic lows at 0.71%.

US Debt to GDP continues to climb to historic highs, now reaching 106%.

Total US Debt reaches $23.2 trillion. Unfortunately, despite US total public debt ballooning over the last decade, US total public debt will likely continue to rise at an unprecedented rate.

Despite the rising debt levels, the US Dollar remains strong. The US Dollar could face significant pressure compared to other major currencies in the next few years as deficits mount and the safe-haven trade to the US Dollar fades.

Light at the end of the tunnel?

Below shows the leading economic indicators compared to the S&P 500. Each time the leading economic indicators fall below -5, stocks subsequently head higher. Thus, the recent rally in stocks may continue despite the current dismal economic conditions.

Source: Bloomberg, Doubline.

And the scary chart:

Historically, as you can see in the chart below, deficits (shaded red area) are usually correlated to the unemployment rate (blue line). When unemployment falls, so does deficits. However, since 2015, deficits have risen as unemployment falls (not good). Now, deficits have skyrocketed! Just wait to see what happens until we hit the next major recession.

Source: Bloomberg, Doubline.

Financial Markets Report is brought to you by:

Blue Pacific Wealth Management

A Registered Investment Advisor in Austin, TX.

Fiduciary. Fee-Only. Independent.

Specializing in strategic portfolio management and financial planning.

Bryan Bourgeois


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Advisory services offered through Shorebreak Capital, LLC.®, A Registered Investment Advisor. Blue Pacific Wealth Management is an Austin-based affiliated firm of Shorebreak Capital, LLC®, a Registered Investment Advisor and specialty investment manager. Bryan Bourgeois is Principal of both Blue Pacific Wealth Management, Inc. & Shorebreak Capital, LLC®.


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