‘Dip’pin Dots

‘Dip’pin Dots

“I would be surprised if there was support in the Republican caucus if the bill comes out at $1.9 trillion,” Susan Collins said Tuesday, suggesting (again) that Joe Biden’s stimulus plan isn’t likely to receive any GOP support.

It’s still not clear what Republicans are hoping to achieve by standing so publicly in opposition to the COVID relief proposal. That’s not to say it’s surprising. But if the idea is to curry favor with a base that’s perhaps more economically “diverse” (if that’s the right word) than ever thanks to Donald Trump, openly opposing provisions that transparently benefit lower-income Americans seems like a somewhat risky proposition.

Sure, pandering to make-believe deficit deities and otherwise parroting tradition Republican talking points could resonate with some voters who still adhere to whatever remains of GOP “orthodoxy,” but it’s not entirely clear what an archetypal “Republican” voter even looks like these days. If he or she looks anything like the “concerned” citizens who showed up on Capitol Hill to express their reservations about the election on January 6, it’s probably safe to say that a higher minimum wage, free money, and other manifestations of fiscal largesse would be just fine with the base. If you don’t believe me, just ask Donald Trump, who famously warned Republicans that not backing $2,000 checks would be a political “death wish.”

Speaking (unfortunately) of death, the US marked a grim milestone this week as COVID fatalities topped 500,000. Readers habitually castigate the figure (below) as being “apples to oranges,” but my response is always the same: It is what it is, folks. And not in the nonchalant sense that the former president used that phrase. “What it is” is one of the worst tragedies to befall the US in the country’s short history (and yes, America is still a very young nation, something people often lose track of).

With that as the macabre backdrop, it’s difficult to fathom the notion that any lawmaker (let alone one half of America’s political duopoly) would suggest that the risk of “overdoing it” on stimulus somehow outweighs the potential benefits of going big again.

Mitt Romney, the GOP’s bastion of sanity, unveiled a minimum wage compromise proposal Tuesday as The Senate parliamentarian weighed whether Democrats can include their push for a $15 floor in the budget reconciliation process. Romney, along with Tom Cotton, offered $10 per hour by 2025. Forgive me, but I think almost all readers, regardless of partisan persuasion, will agree that $10 by 2025 is a joke. And not a very funny one at that.

Importantly (and I’m very fond of appeals to common sense), you don’t have to agree with the notion that the minimum wage should be hiked (at all) to admit that people can’t persist on $10 per hour, let alone $7.25. That is: You can totally disagree with the idea that the best way to get wages up is a federal mandate. In the same vein, you can persist in the notion that raising the minimum wage “too much” could be a disaster for employment. I don’t think your arguments would be very persuasive, but the point is that irrespective of any and all disagreements, one thing we can surely agree on is that nobody can live comfortably on $7.25 per hour in 2021 and not on $10 per hour in 2025.

In any case, there won’t be agreement in Washington. Not on the minimum wage and not on much else when it comes to stimulus either. But Democrats will get most of what they want. Elections, as they say, “have consequences.”

For their part, consumers are growing more confident — sort of. The Conference Board’s gauge ticked up in February, marking a second consecutive monthly rise. The Present Situation gauge rose, the Expectations gauge fell. We’re nowhere near pre-pandemic levels (figure below).

“While the Expectations Index fell marginally in February, consumers remain cautiously optimistic, on the whole, about the outlook for the coming months,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board said. “Notably, vacation intentions—particularly, plans to travel outside the US and via air—saw an uptick this month, and are poised to improve further as vaccination efforts expand.”

Ok, Lynn. We’ll take your word for it.

US equities put on quite a show Tuesday, where that means a roundtrip from steep declines in early trading to afternoon gains. They were buying the dip on Twitter, apparently, as Jerome Powell spoke to lawmakers.

The turnaround in tech was particularly notable. It looked, for an hour or so, as though the Nasdaq was on the brink of a meltdown. By the close, there was “nothing to see here,” as it were.

Tesla, which fell below where it traded when it was added to the S&P, recovered most of its steep declines. Like tech, it dodged a bullet. Tuesday’s early losses came atop a woeful Monday session.

Long story short, some of the market’s most cherished names were on the fast track to a painful correction. That fate was averted. At least for day. If you count Monday and Tuesday morning as a “dip,” consider it bought

Treasurys were mixed, with the long-end slightly cheaper. “As the selloff in Treasuries appears to be risking stall-speed – especially in the belly of the curve – there has been an intuitive increase in realized vol, [but] from a broader context, the volatility paradigm remains well off the periods of market stress that have materialized over the past several years,” BMO’s Ian Lyngen remarked.

Oh, and if you’re curious to know how the Growth/Value tug of war (which Growth is obviously used to winning) is playing out in February amid the rotation across equities, the answer is illustrated in the visual (below).

It’s been a long, long time since Growth underperformed to the extent it has so far in February.

The last time was 2000 or, more to the point, in and around the dot-com bust.


3 thoughts on “‘Dip’pin Dots

  1. When the world’s largest economy has a minimum wage you can’t live on, then that economy is broken, rolling down the road as smoothly as a square wheel. Imagine what a living wage could do for a country that’s trying to eat itself from the inside because a scarcity mentality has turned the masses against one another.

  2. Joe Manchen is against 15 an hour, which means he’s worried his West Virginian constituents won’t support it. it arguably makes no sense but if you already make 15 an hour you don’t feel like the bottom of the totem pole. When 15 an hour becomes the bottom there’s no more room for self delusion.

    1. My child was arguing this with me the other day. She thinks $15 is too high because all the folks who now get $15 will now have to confront the idea they are being screwed (they are). And they could get what they make now in a minimum wage job. I hate to say so, but those who make $15 already make a minimum wage. My daughter argues those people won’t get any more when the minimum goes up so its not fair to raise the minimum because only the lowest caste in society will get more. I’ll never convince this benighted soul that we are not supposed to be the country with our feet on the necks of the very poorest of our brethern.

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