- Nick Burgess
Policy In Yellowstone, Space SPAC and It Looks Like We Get A Third Shot
Welcome to "This Week In The Market" where I cover the biggest financial stories of the week. This week I cover: the Federal Reserve meeting in Jackson Hole, a new SPAC on the block and Pfizer's interesting week.
Show Me Your Tetons, Powell
The Headline: The annual Jackson Hole Economic Symposium kicked off Thursday, albeit virtually this year due to the delta variant. This is the annual meeting where the Federal Reserve members from around the country meet to discuss policy and the economic direction of the nation moving forward.
The BFD: Turns out, it isn't just Kanye who goes to the mountains to think. The Jackson Hole meeting is generally the only time you hear the Federal Reserve, or its Chairman Jerome Powell, make headlines. However, since the pandemic and Powell's forced spotlight appearances on essentially a monthly basis, this year's meeting carries slightly less weight. Investors are viewing this meeting for one reason and one reason only: tapering. The Fed has previously stated its views that they don't need to raise interest rates until their target of 2023, but they recently announced that they are likely to start tapering their bond-buying program implemented during the pandemic. According to MarketWatch, fixed-income experts are fairly aligned that big tapering news will not be announced at this week's meeting, but some time in Q4 heading into 2022, to more accurately judge the spread of the delta variant.
How Can This Make Me Rich?: This is the single most consequential meeting of the minds that can positively or negatively affect your portfolio. The comments made in this forum affect interest rates and fixed-income yields, so keep a close eye on what the Fed announces. If they raise interest rates, it will likely have negative effects on the market, so buying as the market falls or buying puts could be your best option.
Branson-SPAC, Round 2
Eccentric billionaire and founder of Virgin Records, Richard Branson, is dipping his toe back into the SPAC market later this year to take his second space-faring company public. Named "Virgin Orbit," the company will merge with NextGen Acquisition Corp II (NADSAQ: NGCA) at a value of $3.7 billion.
While Virgin Galactic focuses on getting people to space, Virgin Orbit focuses on getting non-people things to space. Using specially crafted Boeing 747's, the company carries rockets into lower orbit and then fires them out of the bottom of the jet into space, which they say is more "flexible" than the ground-based system used by their competitors. The aim is to create a more efficient and effective means of getting objects like satellites into Earth's orbit.
SPAC's have been a bit of a mixed bag this year. While some have done well in the market, Bloomberg Law found that most SPAC's have delivered negative returns through June of 2021. It looks like Branson is dipping back into the SPAC market for the PIPE (private investment in public equity) cash. Virgin Orbit will have close to $500 million in cash on hand when the merger is complete, giving them a head start in the race nobody is talking about.
Stock of the Week
Looks like we're getting a third shot everybody! Or, for a particularly loud part of Twitter, looks like we get to complain about government control and microchips for a third time! That's right, it's Pfizer taking the headlines this week after the FDA formally approved their COVID-19 vaccine like 6 months late.
Pfizer and Moderna shares both rose this week thanks to reports President Biden is considering advocating for a third COVID shot, after research released last week indicated that the vaccines in their current forms begin to lose effectiveness at the 6 month mark. A study this week also indicated positive immuno-response from another dose of the jab, showing positive signs for a vaccine booster shot.
We don't know how these vaccines really treat the newest delta variant of the virus, as there are reports of breakthrough cases, however minimal. Now that the variant is beginning to affect minors, the age range for the vaccine is getting younger, with 12 now the floor for people in the U.S. However, with COVID rates rising and New Mexico's top health officials stating that they're now getting close to rationing care again, this vaccine booster could be the main weapon in our arsenal to combat delta.
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