Earnings and things  This week, the market tried to digest rising COVID-19 cases and worries of large-scale shutdowns (like we’re seeing across Europe), additional stimulus talks falling apart, and of course preparations for election day while going through one of the busiest weeks for earnings. Apple reported a 20% decline in iPhone sales while Twitter and Facebook reported lower active users (honestly not surprising, the political content is getting overwhelming). Unsurprisingly, these stocks all slid after reporting results. It almost seemed habitual because even though Amazon knocked it out of the park, the stock still fell over 5% on its report. Google’s parent company, Alphabet, was the only name that managed to escape…

Change of pace  Initial jobless claims fell 55k last week to the lowest weekly number since the beginning of the pandemic. While this is good to see, part of it was driven by lower claims in California after the state had a temporary freeze in its numbers for two weeks as it worked on its backlog, updated its computer systems, and installed new fraud-detection processes. In even better news, continuing jobless claims dropped by 1m.  Moral of the story: Recovery in the employment market seemed to have stalled over the last few weeks as new unemployment claims were stuck above 800k. This week’s lower numbers are a welcome change of…

Global growth The IMF released its latest economic forecast earlier this week. While this year’s recession is expected to be less severe than their forecast released in June, they are also lowering expected global economic growth for 2021. Past that, global economic growth is expected to moderate significantly. The IMF, like central banks, also stressed the importance of fiscal support during the pandemic. Moral of the story: This recession is going to cause the incidence of extreme poverty to increase for the first time in two decades, which is a huge setback from a global humanitarian perspective. In terms of the impact on the global financial system, the IMF warned the pandemic is likely…

Getting nowhere  Fed Chairman Jerome Powell spoke to the National Association for Business Economics on Tuesday and restated the need for additional stimulus from the federal government. His argument, which is fair, is that too little support would lead to more businesses declaring bankruptcy and create additional pressure on the labor market. Too much support, on the other hand, doesn’t present as much risk (except our debt continues to pile on astronomically). So, the risk/reward balance is skewed in favor of more federal support.  Moral of the story: Despite what the Fed recommends, we’re in a political battle unlike any I remember in the recent past and unfortunately Americans are losing…

Can’t stop spending  Consumer spending increased again in the month of August but at a slower pace than the last three months. Americans dug into their savings to make this happen, because incomes fell by 2.7% in August, which is the biggest drop in incomes since the early days of the pandemic. Spending mainly increased at hotels and restaurants as Americans’ propensity to travel seems to be picking back up again and restaurants across the country are reopening for indoor dining in limited capacities. Moral of the story: Monthly consumer spending, at this point, is only about 4% lower than pre-COVID levels. It’s likely that consumer spending will continue to…

Our new friend, volatility Two major stock indices – the S&P 500 and Dow Jones Industrial Average – closed lower for the fourth straight week after a good bit of volatility. If you remember, I had mentioned a while back that the stock market seemed overpriced, especially given the fact that we’re still in the middle of a pandemic. That, plus uncertainty about the election, rising COVID-19 cases, and declining hope for any additional federal stimulus this year all added layers of risk for investors to parse through.  Moral of the story: I think the market is going to basically be in this same type of holding pattern for the foreseeable future.…

Nobody’s shopping for a new fall wardrobe  Retail sales increased for the third straight month in August but the momentum of recovery definitely seems to be losing steam. Sales increased 0.6% overall with spending at bars and restaurants seeing a sizeable boost – up 4.7% in the month. Even though sales have been improving in many categories, sales at restaurants are still down about 15% compared to last year and sales at clothing stores are down 20% compared to last year. All summer I think I maybe wore 6 real people outfits. Moral of the story: Retail sales are a major component of consumer spending, which accounts for about 2/3 of…

Taking a wrong turn  In an unfortunate turn of events, it seems like the labor market recovery has halted and even slightly reversed. Last week, new unemployment claims increased for the fourth week in a row. New jobless claims under the state and federal programs increased to 1.69m last week from 1.59m the week before. More concerningly, continuing claims also increased slightly to 13.4m, which was the first time this measure has increased in the last five weeks.  Moral of the story: This could be driven by the return of federal unemployment benefits ($300/wk by executive order) or could be indicative of a new wave of layoffs as businesses try…

The last official week of summer  Economic data was pretty scarce during this last official week of summer and the only meaningful piece of information received was the August jobs report. The US created 1.4m jobs in August and the unemployment rate fell to 8.4% (from 10.4% in July), marking the fourth straight decline in unemployment since the peak of 14.7% a few months ago.  Moral of the story: This jobs report exceeded expectations, especially given the concerns from rising COVID-19 cases over the summer reversing reopening across several states. Even though there’s some recovery across many industries, we’re still seeing ~800k new jobless claims every week. Industries related to…

Faltering confidence Consumer confidence fell in August to a new pandemic low after the increase in COVID-19 cases throughout the summer increased pessimism about an economic recovery. The index that reads consumers’ feelings about the economy right now fell from 95.9 in July to 84.2 in August. The index that reads consumers’ feelings about the economy six months from now fell from 88.9 in July to 85.2 in August – not nearly as steep of a fall but still a new pandemic low.  Moral of the story: Americans have somewhat figured out how to live in the midst of COVID-19 – people are returning to restaurants and movie theaters –…