credit economy Markets

The Big Boot

It was nobody's idea of a "good" day. The worst economic downturn since the Great Depression was confirmed. Jobless claims rose for a second consecutive week. Donald Trump raised eyebrows by suggesting the election should be delayed. And lawmakers on Capitol Hill appeared no closer to a deal on additional virus relief, even as extra federal unemployment benefits lapse, leaving millions of jobless Americans to ponder a sharp reduction in government assistance. The figure (below) is from the GDP report, and it shows that household spending on services plunged by nearly 44% annualized in the second quarter. This underscores the scope of the damage done to America's services sector, which bore the brunt of the economic hit from the pandemic. On Wednesday, Jerome Powell warned that many of those jobs may not come back -- or at least not anytime soon. Although the jobless claims data did show a sizable decline in the total number of Americans claiming some form of benefits, that figure lags initial claims by two weeks and continuing claims by a week, which means it too should move higher going forward. "This reinforces our nervousness that the COVID-19 fear factor, states reversing
Subscribe or log in to read the rest of this content.

4 comments on “The Big Boot

  1. dayjob says:

    Looks like the tech titans are going to continue playing the role of Atlas. Looks like they’re going to infinity and beyond…

  2. Joey says:

    Can anyone explain why the Fed is buying the debt of Philip Morris? If the Fed is now in the business of picking winners and losers, and shaping the economy, then why prop up a company whose products impair public health and result in huge costs for our healthcare system?

  3. Joey says:

    ““Hindsight being 20/20, could it really have been that simple on the 2020 version of the ‘Fed rides to the rescue’ trade yet again?”, Nomura’s Charlie McElligott asked, in a Thursday note, citing huge returns for virtually all assets since the Fed’s emergency actions on March 15. “The answer seems to be a resounding ‘YES’”, he went on to say.”

    As far as I can tell, the stock market and the housing market will henceforth be propped up no matter what. The only way these markets can correct is if the entire system fails. So making a rational contrarian bet is to bet on the failure of the system, it seems. Being bearish is essentially defined to be betting on the destruction of America.

  4. “…and the likelihood of a significant cut to the level of unemployment benefits [together] mean the upcoming data flow may not point to as vigorous a recovery as markets are pricing”, ING’s James Knightley cautioned. I’m not sure the markets are really pricing a vigorous recovery, I believe professor H is correct when pointing out that the unstoppable rise in tech equities betrays a very defensive tilt to markets, price action in banks and most industrials is terrible, for the most part these securities reflect economic reality. At this stage the only thing that may change this dynamic is an actual improvement in economic data, presumably this would trigger the rotation to value taunted by Kolanovic and Wilson. I suspect eventually they’ll be proven right, but all indications are we may have to wait a while.

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.