The pandemic’s second wave has appeared in Europe and now in the U.S. The Fed is more concerned about the economy and has taken the unprecedented step of telling Congress it will monetize whatever spending Congress desires. (Not your Father’s Fed!) The latest weekly unemployment data confirm the Fed’s worst fears: The Recovery has stalled! Overview No matter who wins the election, the following issues must be faced: Deflationary forces are at …Read More
Weak Employment Data, Savings Out of Bullets
Personal income fell -2.7% in August. Still, consumer spending rose 1.0% M/M. What Gives? The economy is still very much an employment story. While the official U3 unemployment rate fell to 7.9% from 8.4%, the underlying data was, simply put, “ugly!” “Excess” Savings Last week, I discussed the theory that the “excess” savings from the stimulus packages (one-time stimulus checks and the now expired supplemental $600/week in unemployment benefits) would …Read More
The “Excess Savings” Hypothesis vs. Economic Deceleration
There is some speculation that because only a little more than half of the buildup in savings from the stimulus checks and enhanced unemployment benefits was spent through July, Q4 economic activity will continue to show recovery as the “savings” continues to be spent. Call this the “Excess Savings” Hypothesis. Unfortunately, the incoming data makes this appear to be little more than “hope.” The weekly state and PUA unemployment data …Read More
The Recovery Stalls; Fed Pledges “Lower for Longer;” Equity Markets Pause
With the Fed pledging to keep rates low even when (or if) inflation rises above its 2% target, it is hard to see why long-term Treasury yields (and those of other quality issuers) won’t move toward yields of similar debt in the world’s other industrial economies (i.e., Europe and Japan). The economic lull is now showing up in both the labor market (Initial Claims) and in retail sales, likely because …Read More
As the Economy Stagnates, Equity Markets Pivot
Market volatility has marred the last few equity sessions. The popular indexes all peaked on September 2nd, with the most closely watched S&P 500 down nearly -7% and the tech heavy Nasdaq nearly -10%. But, don’t be fooled by the indexes. Anyone with a diversified portfolio has likely had a significantly different experience in 2020. No doubt Q3 GDP will show a rebound of 30% or more. Many believe that …Read More
The Real Story Of Employment Data
There were two separate events of economic significance the week ended September 5th. First, the financial markets displayed volatility that hasn’t been seen for several months. The S&P 500 began the week at 3,508, rose 2.5% to 3,587 on Wednesday, fell -3.7% to 3,455 on Thursday, and after falling to an intraday low of 3,374 (-6.0% from Wednesday’s high) closed at 3,427 on Friday. On the week, the index lost …Read More
