BCA Weekly Commentary 7/24/20
SUMMARY. The prior 2 weeks saw Covid-19 cases continue to rise world-wide while vaccine visibility increased as trial data was released. As its is earning season, for most part, company's have seen better activity as we moved into July as per most economic data has shown. Although employment has yet to show improvement, concern has focused on the extension of employment benefits which appears now to be the focus of markets short-term.
INVESTMENT IMPACT. During the past week, 2 major developments occur to confirm our allocations within our models. Not only has the vaccines showed progress, but Brazil's President has tested NEGATIVE for Covid-19 (reported this weekend) after testing positive over prior weeks. Our overweight position in Brazil in our models has been tied to our expectation of waning fears of Covid-19 going into the Fall which has to date cause relative valuations in Brazil vs US to diverge (ie Brazil's markets to be depressed vs US). In addition, Elon Musk, CEO of Tesla, reportedly urged Nickel miners to increase production to meet increasing demand of electric vehicles which contain nickel in their batteries. In our model portfolios, we are are overweight the 2 leading nickel producers for that very reason. Having said that, we still remain underweight equities (especially technology) overall as there are increasing signs that certain parts of the market are at high valuations vs historic norms. That and election concern remain concerns moving into Fall.
Our model portfolio performance has been updated on our website as of 6/30/20.
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