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The Real Recession Is Just Starting

At month’s end, we are going to see the BLS announce a 30%+ bounce in real GDP (the Atlanta Fed’s forecast is now above 35%). Much of this is already priced into the equity market, so a positive or negative reaction will only occur if the reported number is significantly above or below the consensus view. In addition, this is old news, as Q3 will have been in the rear-view mirror for …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

Recessionary Impacts: ‘Down The Road’

When JPMorganChase reported earnings in mid-July, CEO Jamie Dimon quipped: “This is not a normal recession… the recessionary part of this you’re going to see down the road.” This observation is spot on. Dimon was observing that, while government had shut down much of the “nonessential” (i.e., 80%) economy, they also transferred $2.1 trillion to private households which more than made up for the $720+ billion of lost wages. We have seen many …Read More

The Recovery Begins – The Steep Part Of The “V”

The big market mover this week was Retail Sales, up 17.7% in May. Consensus estimates averaged 8%. A pop was expected; the magnitude wasn’t. Remember, the economy has never seen this kind of shutdown, or experienced such fiscal or monetary policies, so there is no experience or precedent upon which forecasts can be based. In this recovery, the consensus is likely to get the direction right, but as we have seen with other data …Read More

On Gazing Into The Abyss

The six large cap stocks (FB, AAPL, AMZN, GOOGL, NFLX, and MSFT), which now compose 22% of the S&P 500 (vs. 10% five years ago) are, amazingly, up about 4% YTD as of Friday April 17. The S&P 500, itself, closed Friday, down only -11% YTD (and only -15% below its all-time peak), even in the face of the most severe Recession (Depression?) since the 1930s. And, Wall Street is raving that …Read More