Strategists at firms including Bank of America and Societe Generale have expressed concern about the rapid rise of the stock market, saying a downturn could trigger an exodus. "When the trade turns, everyone wants to get out at the same time because they were only there when the trade was working," says Benjamin Bowler, chief global equity derivatives strategist at BofA.
Coronavirus outbreaks in the US are undercutting a nascent economic recovery, forcing businesses in several states to reduce or re-suspend operations. Commercial foot traffic and restaurant-seating rates have declined, while unemployment has risen in some states.
Modern Money Murmurs: With the three most populous states now reversing course on their re-openings, I've officially run out of optimism for a quick economic recovery.
Emergency lending facilities from the Federal Reserve have accomplished the aim of stabilizing markets, despite modest use of some of them, says Daleep Singh, head of the markets group at the Federal Reserve Bank of New York. The central bank will change its approach if conditions require it, Singh says.
A proposal by the US Federal Housing Finance Agency could reduce Fannie Mae and Freddie Mac's incentive to continue selling credit-risk-transfer securities, which let the agencies offload risk. The proposal would raise the entities' capital standards by tens of billions of dollars.
Eric Rosengren, president of the Federal Reserve Bank of Boston, says the Fed's Main Street Lending Program is likely to become more widely used over time, despite slow uptake since its creation in April. Rosengren says the Boston Fed has seen more interest in the program recently from a number of sectors and he expects this to increase if challenging economic conditions intensify and lengthen.
Fintech Airwallex is building a global payments system with the aim of unseating Swift's worldwide dominance. Valued in April at $1.8 billion, Airwallex is supported by major entities from several sectors.
FICO has introduced a scoring model to measure a consumer's ability to withstand an economic downturn. The FICO Resilience Index is expected to be used by banks in tandem with the traditional credit scoring model, which measures a consumer's credit risk but does not consider economic conditions.
Bank of America revised its plans to bring 180,000 staff members back to the office after a surge in COVID-19 cases. The bank will reportedly wait until after Labor Day to bring staff members back to the office.
Liquidity has not fully recovered from the coronavirus pandemic, leaving markets exposed to potential shocks, according to a report from JPMorgan Chase strategists. "Liquidity conditions have improved considerably, though not fully, and overall functioning has mostly been restored, but markets remain in an unstable equilibrium and vulnerable to shocks," the report states.
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Complaints from lawmakers and an activist body have prompted the European Ombudsman to investigate BlackRock's appointment as adviser to the European Commission on environmental, social and governance rules for banks. The complainants question whether measures proposed by BlackRock would be sufficient to prevent conflicts of interest.
Environmental, social and governance investment products are gaining popularity among investors, with 23 new fund launches so far this year after inflows set a new record last year, according to data from Morningstar. Driving the trend is an increasing awareness of ESG issues as a result of the coronavirus pandemic.
The Commodity Futures Trading Commission will make establishing comprehensive regulation of digital assets a strategic objective over the next four years. "We will develop a holistic framework to promote responsible innovation in digital assets," the agency's 2020-2024 strategic plan says.
The ongoing coronavirus pandemic has prompted the Federal Reserve to greatly expand its balance sheet as a way to protect the financial system. In this blog post, researchers from the NY Fed break down how the central bank's balance sheet and reserves have changed.
The US budget deficit for the first three quarters of the fiscal year reached $2.7 trillion, nearly twice the $1.4 trillion record for the full year of 2009, according to the Congressional Budget Office. The deficit is on pace to surpass $3.8 trillion this year.
Developed and emerging economies must implement fiscal reform as soon as the coronavirus pandemic ends, says Mitsuhiro Furusawa, deputy managing director of the International Monetary Fund. Public debt is expected to exceed 100% of global GDP once countries have dealt with the crisis, Furusawa says.