Accidentally Active

The haves and have-nots 

The government-mandated shutdowns throughout the spring and early summer had a very pronounced impact on retailers – those who were deemed essential and permitted to keep their doors open lived through a much different COVID-19 experience than those who were forced to close. This was abundantly clear as retailer earnings rolled through this week (idk how it’s still earnings season). Walmart sales increased 9.3% and ecommerce sales increased 97%. Target’s same-store sales (sales at stores that have been open for at least a year) increased 24.3% and ecommerce sales tripled. Home Depot’s same-store sales increased 25%. Sales for Ross, however, fell 32.5%. You get the picture. 

Moral of the story: As other retailers have started opening their doors, I find it difficult to believe the “essential” retailers can still hold on to this level of market share. Regardless, one key thing to remember is that we’re still facing 10%+ unemployment and federal unemployment benefits are waning, which means US consumers are going to have much less cash in their pockets. This translates to less retail sales all-together.

More cautious 

July’s FOMC meeting minutes were released this week and indicated the Fed staff is expecting the recovery for employment and the economy to be “somewhat less robust than in the previous forecast.” Driven by the increase in cases, which has led to an increase in general uncertainty, the Fed came across more cautious through these meeting minutes, which pulled stocks lower on Wednesday.

Moral of the story: The Fed indicated additional financial support from the federal government was going to be required to help the economy through these times. The economy is in a vulnerable spot, we have a presidential election coming up, and we’re not really sure what shoe is going to drop next. 

Uncle Sam, I need your help 

New weekly jobless claims increased last week to 1.43m, including all federal and state unemployment programs. Even though the federal $600/wk benefits ran out at the end of July, the law that expands eligibility for benefits lasts until the end of this year. And after Congress failed to reach some form of resolution on a stimulus package, Trump signed an executive order for federal unemployment payments of $300/wk. Many states started offering that extra federal cash last week, which could be a reason for the increase in unemployment applications.  

Moral of the story: Jobs data continue to be volatile – we were running at ~200k weekly jobless claims until the middle of March and we haven’t been able to get back down to those levels in almost half a year, which is just mind-melting. At the end of the day, until the virus is under control, it’s difficult to see some form of normalcy in the employment market. University reopenings are the closest thing to a “return to normalcy” we’ve seen and if this week’s headlines are any indication, it’s not going well. Adding to that realization is the fact that flu season is right around the corner. Put it all together, and it becomes increasingly obvious that we’re likely to see another resurgence in cases and until there’s some form of a vaccine, we’re not getting out of this funk. We’ll hopefully see you in late 2021, old life. 

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