| Wednesday's Headlines 1. US markets sell off as virus spikes force closures 2. All sectors in the red, even tech 3. The IMF lowers its forecasts for global growth 4. Gold has been steady but is underbought compared to other crises Markets Closed
 Image courtesy Eisenlohr/Getty
Markets Today Global markets sank hard today as a spike in new COVID-19 cases is causing cities and states around the world to bring back quarantines, travel restrictions, and other caution signs on the road to recovery. Every sector of the S&P 500 was lower today (even tech), and every stock on the Dow 30 was in the red. Gold prices hit their highest levels in nearly eight years before retreating. The 10-year Treasury note yield fell to 0.68% as investors stepped cautiously.
Florida said confirmed cases jumped by 5,508 on Tuesday, a record, and now total 109,014. The state also said its positivity rate rose to 15.91% from 10.82%. Meanwhile, New York, New Jersey, and Connecticut ordered visitors from certain hotspot states to quarantine for 14 days. Europe is considering restricting U.S. travelers. That could be related to the recent virus spikes on these shores, and it could be a way of retaliating against the U.S. for threatening to launch new tariffs on imports like gin, cheese, and trucks. Nobody wins in that battle.
The IMF says the global drop in growth will be worse than it previously forecast. The resurgence of COVID-19 cases is adding to the pessimism, as is the staggering toll on global employment. Governments are going into deep debt to stem the crisis, but it's pretty clear that more spending will be required.
chart courtesy IMF  [NEW READER SURVEY: As promised, we are running another two-week survey of our U.S.-based readers to gauge your sentiment and see what moves, if any, you have been making with your money given the market recovery. We'll share the results, as always, and we thank you for your time and participation.]
Headlines:
 chart courtesy IMF Global Market Report 2020
IMF Downgrades Global Growth The IMF has downgraded its GDP forecast for 2020 and 2021. It now expects growth of -4.9% in 2020 and 5.4% in 2021. This would leave 2021 GDP some 6.5 percentage points lower than in the pre-COVID-19 projections of Jan. 2020.
The key factors behind the downgrade, according to the IMF's Global Market Report:
This last point bears highlighting. Job losses have been severe in the U.S., as we know, but Europe has been able to contain unemployment with subsidies to companies to keep paying their employees during the downturn. But around the world, the loss in work hours has been staggering. According to the International Labour Organization, the global decline in work hours in the first quarter of 2020 compared to the fourth quarter of 2019 was equivalent to the loss of 130 million full-time jobs. The decline in the second quarter of 2020 is likely to be equivalent to more than 300 million full-time jobs.  chart courtesy YCharts
Gold's Steady Climb Gold has been the standout security throughout this crisis. It has managed to charge higher throughout the downturn and the recovery as investors seek its relative safety. Prices are up 17% year-to-date. Even when markets were ripping higher, gold went along for the ride, assuming its place as a time-tested hedge when investors made risky bets elsewhere. Some institutions, pension funds, and sovereign investors are required to hold a certain percentage of gold in their portfolios, so it has always had a bit of a safety net under it.
Over the past two years, gold has handily outperformed the S&P 500 and the MSCI World Index. Many individual stocks and ETFs, of course, have outperformed gold in the past two years, but they don't have the track record of the precious metal. Bitcoin has outperformed all three, but it does not have broad acceptance across the financial industry, and it has no underlying assets to help pin its value. You can't see it in a vault, and you can't wear it.
While billions of dollars have flowed into gold in the past several months, driving prices higher, 2020 has by no means been the best year for gold price increases on a percentage basis.
Gold prices have rallied 20% or more 15 times since 1981 and 30% or more seven times. The biggest rallies were in 2006–2011 during the late cycle equity rally into and after the Global Financial Crisis. This tells us gold could easily go higher amid more uncertainty, especially with $14 trillion in U.S. money markets and savings accounts looking for yield. 
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(chart courtesy YCHARTS)  Shares of Tractor Supply are up by over 2% amid Merrill Lynch maintaining its Buy rating for the outdoor retail chain. Gilead Sciences' stock price rose by over 1% after a U.S. drug pricing group raised its pricing recommendation for the biopharmaceutical company's antiviral treatment remdesivir.  Shares of cruise lines, such as Norwegian, Royal Caribbean, and Carnival, are all down following a surge in new coronavirus cases, both in the U.S. and globally. Similarly, oil stocks, such as Diamondback Energy and Occidental Petroleum, fell today both on fears of the virus' resurgence and U.S. crude supplies reaching another all-time high. Word of the Day A reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a reversal would be to the upside. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart.
Certain indicators, such as moving average, oscillator, or channel, may help in isolating trends as well as spotting reversals. Reversals may be compared with breakouts.  image courtesy NYT.com
Today in History June 24, 1971: Daniels & Bell Inc., a brokerage run by Willie Daniels and Travers J. Bell Jr., became the first African-American-owned member of the New York Stock Exchange. With the idea of a black-run brokerage a complete novelty, it took the two men roughly two years to raise $1.1 million in capital. After long prosperity and a brief decline, the firm ended up closing its doors in late 1994.
Gregory S. Bell, In the Black: A History of African-Americans on Wall Street (John Wiley & Sons, New York, 2002).
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Wednesday, June 24, 2020
Extreme Caution
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