Morning Notes — Narrative

Narrative: The significance of rising case counts in TX, FL and CA are now being watched for signs of a coincident loss of momentum in the high frequency economic indicators. At the moment, all large companies are proceeding with their reopening plans with the notable exceptions of Apple reclosing some stores and Disney being forced to delay the reopening of Disneyland by California regulators. Today’s pullback in the SPX comes on TX and FL decisions to rollback some reopening plans, but it’s probably not enough to meaningfully shift the market narrative around infections and economic recovery. We expect market psychology will key off of case counts and hospitalizations in areas hardest back in March/April, especially the Tri-state area and in Europe, where there’s no signs yet of relapse.

Support: Technical support for the S&P 500 is still ~2955-3000, while contrarian positioning and sentiment indicators are still at elevated bearish levels. The latest fund flow reports continue to show weekly equity outflows (highest outflows in 7 weeks), record TIPS fund inflows, record precious metals fund inflows and record money market balances. But the most important thing to consider is that you’re living through the largest (by far) liquidity boom of your lifetime.