"Great Reopening" Gets 2 Big Boosts: Fed & Abbott

Market indexes finished mostly higher again today, with only the Nasdaq dipping into the red late in regular trading. The S&P 500 set yet another all-time closing high on its 6th-straight day in the green, with the Dow inching ever-closer to its 2020 breakeven point. Best of all, we’re not seeing these gains come only from a handful of popular stocks blasting further out into the stratosphere — Financials and Real Estate stocks were among Thursday’s strongest performers.

The reason for this good news comes from two specific areas, both of which hit the news cycle ahead of today’s open but which got sweeter the more investors chewed on them. The first was widely expected: a policy shift coming from the Fed at the Economic Policy Symposium at Jackson Hole, delivered by Fed Chair Jay Powell, whereby inflation concerns were now to give way to maximize full employment. According to the Fed, a strong labor market is now Job 1 — which is understandable, especially considering his speech came less than an hour after another 1+ million new American workers were reported to have filed for unemployment in the last week.

Previously, the Fed had been looking for a 2% inflation target which became hard to come by. When the pandemic hit — actually, even before the pandemic fallout — the Fed made the bold decision to slash interest rates and backstop the economy before the coming shutdown could seize the works, such as what happened at the start of the mortgage-backed financial crisis in 2008.

Now that these measures have not led to anything resembling inflation in the economy, the Fed is giving it the gas in hopes spending — both from individuals and business investment, including and especially employee payroll builds — finally provides the remedy the economy needs.

The other side of the economic struggles has to do with curbing the spread of Covid-19, so that the “Great Reopening” can enjoy some sustainability and not have to lurch forward in fits and starts. Enter Abbott Labs ABT, which has received emergency approval from the FDA for its portable antigen rapid Covid test that requires no additional equipment and only costs $5.

Results of the test would be available in minutes and does not need laboratory assistance. This means that schools, plane flights, indoor restaurants, movie theaters and any number of other public congregations might be rendered safe, or at least much safer, that our current environment.

The U.S. government is prepared to spend $750 million on the test, and Abbott has said it plans to produce 50 million tests per month starting in October. This potential game-changer may still need to answer questions regarding test accuracy, but assuming that’s not a big issue, this test has “game-changer” written all over it.

Thus, perhaps we have some light at the end of this tunnel, after all. And this would make this summer’s run-up in market index values — bubblicious though they may still prove to be — far more justified than previously known.

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