What did I say on Wednesday?
To tell you the truth, I don’t remember — or at least not all of it. I say quite a bit each day, and although my synapses are more than a half-decade removed from my last Balvenie, I’ll confess that on some days, I look back at articles penned just 48 hours previous and think “Wow, that was just two days ago?”
But that’s the nice thing about keeping a running, written record of daily musings. You can always just take a look at what you said, and revel in the times you were right. Or wince at the times you were wrong. Whichever the case may be.
Well, 48 hours ago, when US retail sales came in flaming hot, it turns out I wrote the following:
At the risk of overstating the case, this looks like a barnburner. And it should bolster the reflationary vibes.
If this is what happens when incremental stimulus is injected into an economy that’s still partially hamstrung by COVID containment protocols and remains 10 million jobs short of pre-pandemic levels, then it’s not difficult to posit that more stimulus hitting just as the re-opening push gets underway in earnest and virus caseloads plunge, could lead to some pretty hot reads on activity.
To be sure, some of the good vibes engendered by the fourth-best monthly retail sales print on record (figure below) were muted by a disconcerting rise in jobless claims, but nevertheless, my assessment had some merit, I think.
In the latest edition of the bank’s popular weekly “Flow Show” series, BofA’s Michael Hartnett echoed my sentiments from Wednesday. Almost verbatim.
Hartnett called the monthly gain denoted by the red dot in the figure (above) the “mother-of-all retail sales.” For context, note that there were two better monthly reads in 2020, but they came during the rebound from the lockdown plunge, so they’re essentially outliers.
“The epic January 2021 retail sales [data is an] absolute game-changer,” Hartnett declared, citing a hot early-1994 nonfarm payrolls report as a possible historical analog.
That “ended [the] early-90s ‘jobless recovery,’ incited Fed rate hikes, and [a] bond bear which ended with [the] Orange County and Mexico busts,” he went on to say, adding that, January’s retail sales showed stimulus checks are “spent not saved.”
“If $600 equals 6% retail sales, just think what $1,400 will do,” Hartnett remarked. Again, that was precisely my assessment from Wednesday.
The apparent “success” of the $600 checks (and any economic encore following the distribution of another $1,400) could “incentivize bolder fiscal excess,” BofA went on to note, citing child tax credits and student debt forgiveness, and cautioning that such “excess” may “kick-start macro volatility.” The market, Hartnett said, “can likely no longer assume tame CPI” which could hit 4% (YoY, obviously) as soon as the second quarter.
“Nothing is so permanent as a temporary government program,” he added.