Daily BriefsMacro

Macro: Covid-19/ Consumption/ US-China/ Mulan/ Australia and more

By September 14, 2020 No Comments

In today’s briefing:

  • Covid-19/ Consumption/ US-China/ Mulan/ Australia
  • Estimating S&P 500 Downside Risk

Covid-19/ Consumption/ US-China/ Mulan/ Australia

By Diana Choyleva

China News That Matters

  • Chinese Communist Party wins again 
  • Just keep shopping, instructs Beijing
  • US blocks Chinese scholars; cotton ban looming
  • All grown up and savin’ China
  • Will Beijing expel all foreign journalists?

In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Estimating S&P 500 Downside Risk

By Cam Hui

In light of the recent market weakness, we have been asked about downside equity risk. Is this the start of a significant downdraft? How far can stocks fall from current levels?

There are growing, but unconfirmed, signs that large-cap growth and NASDAQ stocks are weakening. The NASDAQ 100 recently breached its rising trend channel, but its performance compared to the S&P 500 remains in a relative uptrend. It is possible that the high-flying NASDAQ stocks are undergoing the beginning of a crash.

Our base case downside risk for the S&P 500 is 2000-2300, with a possible overshoot to about 1700 if the market were to really panic. This does not necessarily mean that the market will fall that far as it is based on the assumption of a NASDAQ and large growth stock crash.  U.S. equity investors can be largely insulated from the downdraft and find opportunity in cyclical and value stocks. Global investors will find more upside potential in non-U.S equities, with a particular focus on emerging markets.

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