US and global equities rose sharply in July, but the marked fall in the US dollar, the rise in gold, the drop in long-term rates and the still-rolling pandemic show that the story may not be so simple. In the coming weeks, investors will have to find the right answers – or at least ask themselves the right questions.
Economic uncertainties, policy commitments and concerns about the pandemic
While global equities rose in July, this masked the fact that investors remained concerned about significant issues. The 5.1% rise in the MSCI AC World index in US dollar terms compared to the end of June, and the 8.4% rally in the MSCI Emerging Markets index in US dollar terms, coincded with a sharp fall in the US dollar. The currency lost 4.2% against a basket of developed currencies (DXY index) and also retreated against major emerging market currencies.
In local currency terms, the main equity indices in Europe and Japan ended the month down after moving sideways during the first three weeks and pulling back at the end of the month.
The 10.9% surge in the gold price took it to a record high at over USD 1 975 per troy ounce. This, and the additional easing in long-term rates, better illustrated investor concerns about signs of a resurgence of the COVID-19 outbreak and renewed US-China tensions.
Throughout the month, bond auctions saw record low rates across the curve, showing that demand for safe haven assets was not weakening.
Exhibit 1: Total returns in July: Currencies do matter
US up, Europe and Japan down
Still, US equities rose further in July (+5.5% for the S&P 500). They did so mainly because company results, although very poor, proved to be better than expected at the start of the reporting season.
The European indices (-1.8% for the EURO STOXX 50) and the Japanese indices (-2.6% for the Nikkei 225) retreated as the euro and the Japanese yen appreciated and amid a lack of economic clarity.
The most sought-after sectors globally were technology, basic materials, utilities and consumer discretionary and staples.
Economic activity has rebounded since May. What’s next?
While economic data was quite positive, it wasn’t entirely reassuring in terms of the coming months.
On the one hand, the improvement in activity surveys in June and July was confirmed and first estimates of national accounts showed a drop in GDP in the second quarter that – even though remarkably steep – was less pronounced than expected.
On the other hand, the rebound in consumer confidence appeared to be stalling. This raised questions about the momentum for consumption, especially given that the recovery in employment in the US appeared to weaken and European short-time working schemes are gradually being adjusted.
The 3.2% year-on-year increase in Chinese GDP in Q2 (after a contraction by 6.8% in Q1) confirmed that activity could rebound after an economic shutdown, but it also highlighted weaknesses, particularly in private domestic demand. It’s an outcome that may be seen in the rest of the world in Q3. This would require economic policies to continue to support activity.
The tone of major central banks remained unchanged: The US Federal Reserve and the ECB are still cautious in their analysis of the economy and are indicating that they will maintain their highly accommodative monetary policies.
EU agrees a big step forward
The first week of July saw the resolution of the case triggered by the 5 May ruling of the German constitutional court. Without this, the Bundesbank could have been legally forced to halt its participation in the ECB’s public securities purchase programme (PSPP).
Investors were then able to shift their attention to the fiscal aspects of EU solidarity.
After delicate and much longer-than-expected negotiations, EU leaders agreed on the Next Generation EU stimulus package on 21 July.
The principle of common debt and direct grants (EUR 390 billion out of EUR 750 billion) paid to countries most affected by the economic consequences of the pandemic was accepted. The accord came at the cost of a few concessions made to the ‘frugal’ countries, which have, among other things, obtained greater rebates on their budget contributions.
Even though some questions remain unanswered, the affirmation of EU solidarity sent a strong political signal. It was welcomed by investors and contributed to the rise of the euro. The currency occasionally topped USD 1.19, its highest since May 2018.
The Next Generation EU stimulus package was seen as very positive for southern member states. The Italian bond market is viewed as the main beneficiary. The yield on the 10-year BTP eased by 25bp from the end of June to 1.01% at the end of July. The previous day it had fallen to 0.97%, its lowest since 24 February.
The performance of the Spanish and Portuguese bond markets was less pronounced, with a monthly fall of 13bp for 10-year maturities.
At the end of the month, the 10-year German Bund fell back to below the ECB’s deposit rate (-0.50%) for the first time in more than two months. After a brief return to its lowest level since mid-May, it ended at -0.52% on 31 July (-7bp compared to end-June).
Short-term hurdles are tricky to judge, but help is at hand
In the coming weeks, investors will need to form firm views on a number of topics.
While it might have been easy to foresee a drastic drop in activity followed by a rebound after the containment measures were lifted, it will be tougher will be to trace out what happens next as the main consumption catch-up effects have already been seen and yet many questions remain. Are households going to keep back some of their savings if they believe employment conditions are likely to worsen? Will companies decide to invest when many uncertainties remain?
These are tricky considerations, but investors will find some help at hand. Firstly, governments remain committed to supporting their economies, whether through monetary or fiscal instruments. This should ensure low rates for a long time as well as negative real rates, which appears to be favourable for equities.
Also, while second quarter corporate earnings have, as expected, deteriorated, there are several reasons to remain somewhat optimistic. In the US, earnings and revenues generally beat expectations and the outlook from management and financial analysts is encouraging. In particular, upward earnings revisions are likely to support equities.
The macro and microeconomic aspects, even though exceptional due to the unique nature of the current crisis, still look favourable in the medium term. That said, the COVID-19 pandemic unfortunately remains yet to be curbed.
In addition, the political and geopolitical environment looks hard to read just a few months out from the US elections.
In the short term, confidence should make the difference. While households have been concerned over the re-emergence of infections that could lead to further restrictions in travel and social gatherings, investors are focusing on progress in the search for treatments or vaccines. The difficulties inherent in this type of research, the results of which are hard to interpret, could lead to more erratic swings in equities. Given our medium-term scenario, any correction should be seen as a buying opportunity.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
Four of the highest ranking U.S. health officials—including Dr. Anthony Fauci—met in secret to discuss whether or not naturally immune people should be exempt from getting COVID-19 vaccines, The Epoch Times can reveal.
The officials brought in four outside experts to discuss whether the protection gained after recovering from COVID-19—known as natural immunity—should count as one or more vaccine doses.
“There was interest in several people in the administration in hearing basically the opinions of four immunologists in terms of what we thought about … natural infection as contributing to protection against moderate to severe disease, and to what extent that should influence dosing,” Dr. Paul Offit, one of the experts, told The Epoch Times.
Offit and another expert took the position that the naturally immune need fewer doses. The other two experts argued natural immunity shouldn’t count as anything.
The discussion did not lead to a change in U.S. vaccination policy, which has never acknowledged post-infection protection. Fauci and the other U.S. officials who heard from the experts have repeatedly downplayed that protection, claiming that it is inferior to vaccine-bestowed immunity. Most studies on the subject indicate the opposite.
The meeting, held in October 2021, was briefly discussed before on a podcast. The Epoch Times has independently confirmed the meeting took place, identified all of the participants, and uncovered other key details.
Dr. Jay Bhattacharya, a professor of medicine at Stanford University who did not participate in the meeting, criticized how such a consequential discussion took place behind closed doors with only a few people present.
“It was a really impactful decision that they made in private with a very small number of people involved. And they reached the wrong decision,” Bhattacharya told The Epoch Times.
From the government:
Fauci, the head of the U.S. National Institute of Allergy and Infectious Diseases and the chief medical adviser to President Joe Biden until the end of 2022
Dr. Vivek Murthy, the U.S. surgeon general
Dr. Rochelle Walensky, the head of U.S. Centers for Disease Control and Prevention (CDC)
Dr. Francis Collins, head of the U.S. National Institutes of Health, which includes the National Institute of Allergy and Infectious Diseases, until December 2021
Dr. Bechara Choucair, the White House vaccine coordinator until November 2021
From outside the government:
Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia and an adviser to the U.S. Food and Drug Administration on vaccines
Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and a former member of Biden’s COVID-19 advisory board
Akiko Iwasaki, professor of immunobiology and molecular, cellular, and developmental biology at Yale University
Dr. Peter Hotez, co-director of Texas Children’s Hospital Center for Vaccine Development and dean of the Baylor College of Medicine’s School of Tropical Medicine
Fauci and Murthy decided to hold the meeting, according to emails The Epoch Times obtained.
“Would you be available tonight from 9-9:30 for a call with a few other scientific colleagues on infection-induced immunity? Tony and I just discussed and were hoping to do this sooner rather than later if possible,” Murthy wrote in one missive to Fauci, Walensky, and Collins.
All three quickly said they could make it.
Walensky asked who would be there.
Murthy listed the participants. “I think you know all of them right?” he said.
Walensky said she knew all but one person. “Sounds like a good crew,” she added.
During the meeting, Offit put forth his position—that natural immunity should count as two doses.
At the time, the CDC recommended three shots—a two-dose primary series and a booster—for many Americans 18 and older, soon expanding that advice to all adults, even though trials of the boosters only analyzed immunogenicity and efficacy among those without evidence of prior infection.
Osterholm sided with Offit, but thought that having recovered from COVID-19 should only count as a single dose.
“I added my voice at the meeting to count an infection as equivalent to a dose of vaccine! I’ve always believed hybrid immunity likely provides the most protection,” Osterholm told The Epoch Times via email.
Hybrid immunity refers to getting a vaccine after recovering from COVID-19.
Some papers havefound vaccination after recovery boosts antibodies, which are believed to be a correlate of protection. Other research hasshown that the naturally immune have a higher risk of side effects than those who haven’t recovered from infection. Some experts believe the risk is worth the benefit but others do not.
Hotez and Iwasaki, meanwhile, made the case that natural immunity should not count as any dose—as has been the case in virtually the entire United States since the COVID-19 vaccines were first rolled out.
Iwasaki referred to a British preprint study, soon after published in Nature, that concluded, based on survey data, that the protection from the Pfizer and AstraZeneca vaccines was heightened among people with evidence of prior infection. She also noted a study she worked on that found the naturally immune had higher antibody titers than the vaccinated, but that the vaccinated “reached comparable levels of neutralization responses to the ancestral strain after the second vaccine dose.” The researchers also discovered T cells—thought to protect against severe illness—were boosted by vaccination.
There’s a “clear benefit” to boosting regardless of prior infection, Iwasaki, who has since received more than $2 million in grants from the National Institutes of Health (NIH), told participants after the meeting in an email obtained by The Epoch Times. Hotez received $789,000 in grants from the NIH in fiscal year 2020, and has received other grants totaling millions in previous years. Offit, who co-invented the rotavirus vaccine, received $3.5 million in NIH grants from 1985 through 2004.
Hotez declined interview requests through a spokesperson. Iwasaki did not respond to requests for comment.
No participants represented experts like Bhattacharya who say that the naturally immune generally don’t need any doses at all.
In public, Hotez repeatedly portrayed natural immunity as worse than vaccination, including citing the widely criticized CDC paper, which drew from just two months of testing in a single state.
In one post on Twitter on Oct. 29, 2021, he referred to another CDC study, which concluded that the naturally immune were five times as likely to test positive compared to vaccinated people with no prior infection, and stated: “Still more evidence, this time from @CDCMMWR showing that vaccine-induced immunity is way better than infection and recovery, what some call weirdly ‘natural immunity’. The antivaccine and far right groups go ballistic, but it’s the reality.”
That same day, the CDC issued a “science brief” that detailed the agency’s position on natural immunity versus the protection from vaccines. The brief, which has never been updated, says that available evidence shows both the vaccinated and naturally immune “have a low risk of subsequent infection for at least 6 months” but that “the body of evidence for infection-induced immunity is more limited than that for vaccine-induced immunity.”
Evidence shows that vaccination after infection, or hybrid immunity, “significantly enhances protection and further reduces risk of reinfection” and is the foundation of the CDC’s recommendations, the agency said.
Several months later, the CDC acknowledged that natural immunity was superior to vaccination against the Delta variant, which was displaced in late 2021 by Omicron. The CDC, which has made misleading representations before on the evidence supporting vaccination of the naturally immune, did not respond to a request for comment regarding whether the agency will ever update the brief.
Iwasaki had initially been open to curbing the number of doses for the naturally immune—”I think this supports the idea of just giving one dose to people who had covid19,” she said in response to one Twitter post in early 2021, which is restricted from view—but later came to argue that each person who is infected has a different immune response, and that the natural immunity, even if strong initially, wanes over time.
Osterholm has knocked people who claim natural immunity is weak or non-existent, but has also claimed that vaccine-bestowed immunity is better. Osterholm also changed the stance he took in the meeting just several months later, saying in February 2022 that “we’ve got to make three doses the actual standard” while also “trying to understand what kind of immunity we get from a previous infection.”
Offit has been the leading critic on the Vaccines and Related Biological Products Advisory Committee, which advises U.S. regulators on vaccines, over their authorizations of COVID-19 boosters. Offit has said boosters are unnecessary for the young and healthy because they don’t add much to the primary series. He also criticized regulators for authorizing updated shots without consulting the committee and absent clinical data. Two of the top U.S. Food and Drug Administration (FDA) officials resigned over the booster push. No FDA officials were listed on invitations to the secret meeting on natural immunity.
Fauci and Walensky Downplay Natural Immunity
Fauci and Walensky, two of the most visible U.S. health officials during the pandemic, have repeatedly downplayed natural immunity.
Fauci, who said in an email in March 2020 that he assumed there would be “substantial immunity post infection,” would say later that natural immunity was real but that the durability was uncertain. He noted the studies finding higher antibody levels from hybrid immunity.
In September 2021, months after claiming that vaccinated people “can feel safe that they are not going to get infected,” Fauci said that he did not have “a really firm answer” on whether the naturally immune should get vaccinated.
“It is conceivable that you got infected, you’re protected—but you may not be protected for an indefinite period of time,” Fauci said on CNN when pressed on the issue. “So I think that is something that we need to sit down and discuss seriously.”
After the meeting, Fauci would say that natural immunity and vaccine-bestowed immunity both wane, and that people should get vaccinated regardless of prior infection to boost their protection.
Walensky, before she became CDC director, signed a document called the John Snow Memorandum in response to the Great Barrington Declaration, which Bhattacharya coauthored. The declaration called for focused protection of the elderly and otherwise infirm, stating, “The most compassionate approach that balances the risks and benefits of reaching herd immunity, is to allow those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk.”
The memorandum, in contrast, said there was “no evidence for lasting protective immunity to SARS-CoV-2 following natural infection” and supported the harsh lockdown measures that had been imposed in the United States and elsewhere.
In March 2021, after becoming director, Walensky released recommendations that the naturally immune get vaccinated, noting that there was “substantial durability” of protection six months after infection but that “rare cases of reinfection” had been reported.
Walensky hyped the CDC study on natural immunity in August 2021, and the second study in October 2021. But when the third paper came out concluding natural immunity was superior, she did not issue a statement. Walensky later told a blog that the study found natural immunity provided strong protection, “perhaps even more so than those who had been vaccinated and not yet boosted.”
But, because it came before Omicron, she said, “it’s not entirely clear how that protection works in the context of Omicron and boosting.”
Walensky, Murthy, and Collins did not respond to requests for interviews. Fauci, who stepped down from his positions in late 2022, could not be reached.
Murthy and Collins also portrayed natural immunity as inferior. “From the studies about natural immunity, we are seeing more and more data that tells us that while you get some protection from natural infection, it’s not nearly as strong as what you get from the vaccine,” Murthy said on CNN about two months before the meeting. Collins, in a series of blog posts, highlighted the studies showing higher antibody levels after vaccination and urged people to get vaccinated. He also voiced support for vaccine mandates.
UNIVERSITY PARK, Pa. — Waaahhh! While babies have a natural mechanism for alerting their parents that they need a diaper change, a new sensor developed by researchers at Penn State could help workers in daycares, hospitals and other settings provide more immediate care to their charges.
Credit: Huanyu “Larry” Cheng/Penn State
UNIVERSITY PARK, Pa. — Waaahhh! While babies have a natural mechanism for alerting their parents that they need a diaper change, a new sensor developed by researchers at Penn State could help workers in daycares, hospitals and other settings provide more immediate care to their charges.
The new sensor — so cheap and simple to produce that it can be hand-drawn with a pencil onto paper treated with sodium chloride — could clear the way for wearable, self-powered health monitors for use not only in “smart diapers” but also to predict major health concerns like cardiac arrest and pneumonia.
“Our team has been focused on developing devices that can capture vital information for human health,” said Huanyu “Larry” Cheng, the James L. Henderson, Jr. Memorial Associate Professor of Engineering Science and Mechanics at Penn State. “The goal is early prediction for disease conditions and health situations, to spot problems before it is too late.”
Cheng is the lead author on a new study, published in the journal Nano Letters, which describes the design and fabrication process for a reliable, hand-drawn electrode sensor. The sensor is created using a pencil, drawn on paper treated with a sodium chloride solution. The hydration sensor is highly sensitive to changes in humidity and provides accurate readings over a wide range of relative humidity levels, from 5.6% to 90%.
Research into wearable sensors has been gaining momentum because of their wide-ranging applications in medical health, disaster warning and military defense, Cheng explained. Flexible humidity sensors have become increasingly necessary in health care, for uses such as respiratory monitoring and skin humidity detection, but it is still challenging to achieve high sensitivity and easy disposal with simple, low-cost fabrication processes, he added.
“We wanted to develop something low-cost that people would understand how to make and use — and you can’t get more accessible than pencil and paper,” said Li Yang, professor in the School of Artificial Intelligence at China’s Hebei University of Technology. “You don’t need to have some piece of multi-million-dollar equipment for fabrication. You just need to be able to draw within the lines of a pre-drawn electrode on a treated piece of paper. It can be done simply and quickly.”
The device takes advantage of the way paper naturally reacts to changes in humidity and uses the graphite in the pencil to interact with water molecules and the sodium chloride solution. As water molecules are absorbed by the paper, the solution becomes ionized and electrons begin to flow to the graphite in the pencil, setting off the sensor, which detects those changes in humidity in the environment and sends a signal to a smartphone, which displays and records the data.
Essentially, drawing on the pre-treated paper within pre-treated lines creates a miniaturized paper circuit board. The paper can be connected to a computer with copper wires and conductive silver paste to act as an environmental humidity detector. For wireless application, such as “smart diapers” and mask-based respiration monitoring, the drawing is connected to a tiny lithium battery which powers data transmission to a smartphone via Bluetooth.
For the respiration monitor, the team drew the electrode directly on a solution-treated face mask. The sensor easily differentiated mouth breathing from nose breathing and was able to classify three breathing states: deep, regular and rapid. Cheng explained that the data collected could be used to detect the onset of various disease conditions, such as respiratory arrest and shortness of breath and provide opportunities in the smart internet of things and telemedicine.
He added that respiratory rate is a fundamental vital sign and research has shown it to be an early indicator of a variety of pathological conditions such as cardiac events, pneumonia and clinical deterioration. It can also indicate emotional stressors like cognitive load, heat, cold, physical effort and exercise-induced fatigue.
Compared with breath, the human skin exhibits a smaller change in humidity, but the researchers were still able to detect changes using their pencil-on-paper humidity sensor, even after test subjects applied lotion or exercised. Skin is the body’s largest organ, Cheng explained, so if it is not processing moisture correctly, that could indicate that some other health issue is going on.
“Different types of disease conditions result in different rates of water loss on our skin,” he said. “The skin will function differently based on those underlying conditions, which we will be able to flag and possibly characterize using the sensor.”
The team also integrated four humidity sensors between the absorbent layers of a diaper to create a “smart diaper,” capable of detecting wetness and alerting for a change.
“That application was actually born out of personal experience,” said Cheng, who is the father of two young children. “There’s no easy way to know how wet is wet, and that information could be really valuable for parents. The sensor can provide data in the short-term, to alert for diaper changes, but also in the long-term, to show patterns that can inform parents about the overall health of their child.”
The applications of the humidity sensor go beyond “smart diapers” and monitoring for respiration and perspiration, Cheng explained. The team also deployed the sensor as a noncontact switch, which could sense the humidity changes in the air from the presence of a finger without the finger touching the sensor. The team used the noncontact switch to operate a small-scale elevator, play a keyboard and light up an LED array.
“The atoms on the finger don’t need to touch the button, they only need to be near the surface to diffuse the water molecules and trigger the signal,” Cheng said. “When we think about what we learned from the pandemic about the need to limit the body’s contact with shared surfaces, a sensor like this could be an important tool to stop potential contamination.”
Other authors on the study are Penn State doctoral candidate Ankan Dutta as well as Guangyu Niu, Zihan Wang, Ye Xue, Jiayi Yan, Xue Chen, Ya Wang, Chaosai Liu, Shuaijie Du Langang Guo of the Hebei University of Technology. Peng Zhou of Tianjin Tianzhong Yimai Technology Development Co. Ltd. also contributed to the research.
Cheng’s work was funded by the National Institutes of Health, the National Science Foundation and Penn State.
Method of Research
Subject of Research
Pencil-on-Paper Humidity Sensor Treated with NaCl Solution for Health Monitoring and Skin Characterization
Adani Contagion Spreads As Citi Halts Margin Loans On Debt
Indian billionaire Gautam Adani's corporate empire is crumbling. A deeper selloff forced Adani Enterprises Ltd. to pull a stock sale in the final minute. Two banks have rejected bonds tied to Adani companies as collateral for client trades. And the turmoil has pushed MSCI India Index to the brink of a technical correction.
Adani Enterprises plunged 27% on Thursday in Mumbai trading after it was revealed late Wednesday that it abandoned a $2.4 billion follow-on share sale. Today's losses added to a 28% tumble in the previous session.
The decision to pull the share offering comes as more than $100 billion in market cap has been wiped out in Adani group's stocks following a scathing report from Hindenburg Research last Tuesday. Dollar bonds tied to the companies are also plunging into the distressed territory, raising the risk of default.
Yesterday, Bloomberg reported that Credit Suisse designated a zero lending value for bonds sold by Adani Ports and Special Economic Zone, Adani Green Energy, and Adani Electricity Mumbai. Now Citi's wealth management arm has done the same.
The meltdown in Adani shares has significant implications for Indian stocks:
"This is potentially a bigger problem for Indian equities, which have done so well during the pandemic as China pursued its Covid Zero policy."
"The long-term ramifications could be quite negative," said Peter Garnry, head of equity strategy at Saxo Bank A/S in Hellerup, Denmark.
The implosion of the Adani companies, which accounted for almost one out of every $10 invested in Indian stocks at the group's peak in September, has provided a catalyst for investors complaining about the nation's expensive valuations to trim their holdings. The fallout is likely to make it harder for other Indian corporations to raise funds, put them under increased regulatory scrutiny, while also testing the faith voters have in Prime Minister Narendra Modi.
The turmoil has helped push MSCI India Index to the brink of a technical correction.
Meanwhile, global funds have yanked a net $2 billion out of Indian equities in the three days through Tuesday. Funds are selling now, and asking questions later.
"The Adani-related headlines are generating a high level of negative attention, which could dampen investor appetite for Indian stocks," said Jian Shi Cortesi, who manages China and Asia equity funds at GAM Investment Management in Zurich.
One major risk we see is the deterioration in access to financing for Adani companies, some of which are highly leveraged.
Even after the latest slide in Adani group shares, Bloomberg Intelligence's Nitin Chanduka believes there is more downside ahead.