Jun 19, 2020

Axios Markets

By Dion Rabouin
Dion Rabouin

🚨🚨 DO NOT MISS IT: Today at 12:30pm ET I'll be hosting a Juneteenth discussion featuring Valerie Jarrett, former senior adviser to President Barack Obama, and BET co-founder Bob Johnson. (I'll be talking to a black billionaire about reparations ... seriously.) Register here.

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🎙 "[T]here shall be neither slavery nor involuntary servitude in any of the Territories of the United States now existing, or which may at any time hereafter be formed or acquired by the United States, otherwise than in punishment of crimes where of the party shall have been duly convicted." - See who said it and why it matters at the bottom. (It may surprise you.)

1 big thing: Half of the Fortune 100 pledge $2B to fight inequality
Data: Fortune 500, Axios analysis of company statements, get the data; Chart: Andrew Witherspoon, Naema Ahmed/Axios

Since our Monday story on Fortune 100 companies' donations to battle racism and inequality, the tally has risen to more than $2 billion and now includes 50 firms, according to company announcements and an Axios analysis.

Why it matters: Pressure is growing for wealthy corporations to speak out on social issues and to back up those words with sizable funding. More are doing so than ever before and in a much more public way.

  • Over the past week, PepsiCo announced a $400 million contribution over five years to "lift up Black communities and increase Black representation" at the company.
  • Less public-facing companies like AbbVie, Dow Chemical and Caterpillar are also joining in, with each announcing commitments of over $1 million.

By the numbers: The top 10 companies account for the lion's share of money pledged, with $1.86 billion of the $2.05 billion total.

  • The top 10 companies have committed to an average of 1.14% of their 2019 profits. That raises the average by about 6 times from what it was as of Monday.
  • The other 40 companies have committed 0.05% of their 2019 profits.

Yes, but: The donations are still literally pennies on the dollar when compared to the collective $500 billion in profits made last year and many lack specific details on how the companies plan to ensure their donations will make a difference.

  • Activists say they want to see increased hiring and retention of black workers as well as increased wages for existing employees in addition to the monetary commitments.

Between the lines: Most the companies that donated (and some that did not) have made bold, unequivocal statements condemning racism and clearly voicing support for the victims of police killings.

  • At least 29 of the Fortune 100 companies have released statements including the word "racism."

What they're saying: "As people around the world demand justice for George Floyd, Ahmaud Arbery, Breonna Taylor, Rayshard Brooks and far too many others, we have been thinking hard about how PepsiCo can help dismantle the systemic racial barriers that for generations have blocked social and economic progress for Black people in this country," PepsiCo chairman and CEO Ramon Laguarta said in a LinkedIn post announcing the commitment on Monday.

  • "We know that the first step toward change is to speak up, so I want to be very clear: Black Lives Matter, to our company and to me."
2. Catch up quick

President Donald Trump said in a tweet that the U.S. maintains the option to completely decouple from China. (Bloomberg)

Kroger said customers are still grocery shopping more as sales increased 20% in April and May, after a 30% increase in March. (WSJ)

The Bank of England announced a £100 billion bond-buying program, the latest central bank to increase efforts to bolster its economy. (The Guardian)

Marathon Petroleum is in discussions with potential buyers of its Speedway gas station unit. (WSJ)

Japanese investors are piling into dollar-based and riskier assets, as yen-dollar basis for 30-year contracts has plunged to a record low -76 basis points and remained in that range since May. (Bloomberg)

3. Unemployment claims are declining very slowly

Data: U.S. Department of Labor; Chart: Andrew Witherspoon/Axios

Americans lost their jobs at a frenetic pace beginning in March, as unemployment figures rocketed to never-before-seen totals, but they are not coming back nearly as quickly, data from the U.S. Department of Labor shows.

Why it matters: While the number of claims has fallen, nearly 35 million Americans were receiving or had applied for some kind of unemployment insurance as of June 13.

  • Those numbers are especially shocking given that businesses have been reopened in certain parts of the U.S. for close to a month after government-imposed lockdowns.
  • “Labor market problems have shifted away from mass closings and layoffs in immediate response to shutdown orders, and toward still-catastrophic numbers of new layoffs related to the long-term, reverberating effects of a recession,” Andrew Stettner, senior fellow at The Century Foundation, told Reuters.

Driving the news: The Labor Department found another 1.51 million Americans filed new applications for traditional jobless benefits last week, down slightly from 1.57 million applications the week before.

Watch this space: The number of people applying for benefits via the government's Pandemic Unemployment Assistance program increased by nearly 60,000 last week.

  • The Pandemic Emergency Unemployment Compensation program saw claims rise by close to half a million for the week ended May 30.
4. Wealth advisers are urging the ultra rich to buy gold
Data: FactSet; Chart: Axios Visuals

Wealthy clients are increasingly being told by financial advisers to buy gold, betting the Fed's binge of bond buying and an overbought stock market will soon push the precious metal's price higher — potentially to its highest price ever.

What's happening: A new report from Reuters surveying nine private banks that collectively handle around $6 trillion in assets for the world’s ultra-rich, found they had advised clients to increase their allocation to gold.

  • All of them said they expected gold prices to end the year higher than they are now.

What they're saying: UBS predicts gold will hit $1,800 by year-end in its base-case scenario and could even touch a record high of $2,000 in the event of a second wave of novel coronavirus infections, Reuters' Brenna Hughes Neghaiwi and Simon Jessop report.

  • “With the recent equity rally, people have become more nervous. People are actively seeking out portfolio hedges that might perform well in a range of scenarios,” Kiran Ganesh from UBS’ chief investment office said in the article.
  • Morgan Stanley added a 5% position to commodities including gold in all its models at the end of March.

Between the lines: Gold has been trading in a tight range since April, despite a breakout in the stock market. That could change if wealthy investors begin to make significant moves into gold.

  • "The boost in demand could be a self-fulfilling prophecy for the metal’s price, as any shift in allocation from bond and equity markets, estimated at up to a combined $200 trillion, has a much larger impact on the smaller gold market, estimated at less than $5 trillion," the article notes.
5. Investors pull out of money market funds for fourth straight week

Investors pulled just over $33 billion out of money market funds for the week ended June 17, according to data from the Investment Company Institute.

  • It was the fourth straight week of outflows for the safe-haven vehicle typically used by investors as savings accounts for cash holdings.

The big picture: Money market funds had seen their assets rise to nearly $5 trillion as investors pulled out of riskier plays like stocks and commodities at a record pace over the preceding months.

  • Money market funds have seen a total of $104.74 billion of outflows in the past four weeks.

Yes, but: Until this week, funds were largely flowing into bonds rather than stocks. ICI data and Refinitiv data show that equity funds had seen $38 billion of outflows in the weeks ended May 13 to June 3.

  • The funds saw $13.1 billion of inflows for the week ended June 10, the last week for which ICI equity fund data is available.
  • Data from Refinitiv Lipper shows equity funds saw $25.5 billion in outflows for the week ending June 17.
Dion Rabouin

Thanks for reading!

Quote: "[T]here shall be neither slavery nor involuntary servitude in any of the Territories of the United States now existing, or which may at any time hereafter be formed or acquired by the United States, otherwise than in punishment of crimes where of the party shall have been duly convicted."

Why it matters: On June 19, 1862, Congress prohibited slavery in all current and future U.S. territories (though not in the states). However, this is not why black Americans celebrate the Juneteenth holiday.

  • Juneteenth is celebrated in honor of June 19, 1865, when a military order informed thousands of still-held slaves in Texas they had been freed.
  • The day was three years after the congressional order, close to three years after President Abraham Lincoln's Emancipation Proclamation, and months after Gen. Robert E. Lee had surrendered, effectively ending the Civil War.