🌞Happy Thursday! I'm taking a "mental health day" on Friday, so you will be in the hands of Courtenay Brown and Jennifer Kingson tomorrow. I'll be back in your inbox on Monday.
🎙 "The good and the great are only separated by the willingness to sacrifice." See who said it and why it matters at the bottom.
U.S. stocks fell sharply in the final hour of trading Wednesday after President Trump seemingly reignited the trade war, telling reporters the U.S. would be evaluating whether China has complied with the "phase 1" trade deal to buy an extra $200 billion a year of U.S. goods.
Why it matters: As the COVID-19 pandemic continues to choke the U.S. and global economy, Trump is threatening to tighten the vice.
By the numbers: S&P Global Market Intelligence, Panjiva, finds that not only is China not making purchases on pace for a $200 billion increase, it is now $21.2 billion behind — not even halfway to its target on a monthly basis.
What's happening: Most had long expected that China would be unable to meet the terms of the deal as the novel coronavirus ravaged its economy, causing the worst quarterly economic contraction on record.
What we're hearing: "Trump is basically trying to distract the American public from focusing too much on the unemployment rate, employment figures and so on," Keith Wade, chief economist at Schroders, said during a recent webcast.
Between the lines: The nascent stock market rebound also could be threatened by revived tensions between the world's two largest economies.
Watch this space: The general public is starting to grow more wary of the tariffs. A new survey from CivicScience finds a record high 71% of Americans are concerned, and industry lobbying groups have ramped up messaging again opposing the trade war.
The Treasury will offer $20 billion in new 20-year U.S. government debt to finance the ballooning deficit on May 20. (MarketWatch)
Senate Republicans are citing renewed concerns about the U.S. budget deficit as they pump the brakes on more coronavirus relief spending. (WSJ)
As companies around the country plan for a prolonged recovery, many are transitioning their workers from temporary layoffs to permanent ones. (Bloomberg)
"The monetary policy response to COVID-19 has been massive," Bank of America Global Research analysts write in a recent note to clients.
What's happening: Led by the Fed, which has added $2.5 trillion to its balance sheet in less than two months, all of the world's major central banks have taken extreme policy action.
The big picture: BofA analysts expect total holdings among the "big six" central banks to increase from 46% of GDP at the end of 2019 to around 78% by the end of 2020.
What's next: Inflation and currency risk in the near term are not major worries, BofA argues, as developed markets could actually see their currencies rise in value as more emerging market central banks start their own forays into quantitative easing.
In the short term, the coronavirus pandemic is reducing global emissions and helping clear out smog around the world, but it may end up doing more damage to the environment in the long term.
The big picture: The pandemic is helping reduce the use of fossil fuels, but it is decreasing investments in things like wind and solar power and financial assets like green bonds, says Jessica Ground, global head of stewardship at Schroders.
Driving the news: In April, total issuance of ESG bonds — green, sustainability, and social bonds — increased by 272% year over year and was double the total from March, reaching $48.5 billion, according to data from Morgan Stanley.
What it means: ESG bonds are specifically earmarked to raise money for positive social outcomes or climate and environmental projects.
Yes, but: 76% of the total ESG issuance in April came from multilateral development banks, with the majority supporting COVID-19 relief efforts, Moody's found in a recent analysis.
Where it stands: Total global sustainable bond issuance fell 32% in the first quarter from Q4 2019, and green bond volumes declined 49%, per Moody's.
U.S. pension plans already were above their target allocation to fixed income before the coronavirus pandemic, and the outperformance of fixed income during the first quarter has further shifted the tide, a new report from eVestment shows.
Why it matters: Fewer people are participating in the stock market's gains and losses.
Why it's happening: The combination of an older population nearing retirement and anxiety about a record-long bull market in stocks shifted investors toward higher allocation to bonds and movement out of stocks.
One level deeper: Based on target allocations provided to eVestment, U.S. pension plans were over-allocated to fixed income by 450 basis points at the end of the first quarter and under-allocated to equities by more than 350 basis points.
Thanks for reading!
Quote: "The good and the great are only separated by the willingness to sacrifice."
Why it matters: After winning three NCAA championships, star UCLA Bruins center Lew Alcindor converted to Islam and changed his name to Kareem Abdul-Jabbar, going on to win six NBA championships and six MVPs.