Our Economic Reality…

Markets Take It on the Chin

Not too many places to hide last week as stocks and bonds lost value.  All US Stock Market Indexes fell over 5%, as did International Stocks.

Our 10 Year US Treasury finished the week with the yield rising to .86%, the highest since June.

Is the reason the upcoming election, no stimulus, the economy or the Coronavirus?  Certainly, most tend to agree, it’s all of the above!!  At least most of us can agree on one thing!!

With that said, volatility should have been expected, and should continue, until these significant issues start to wind down.  Hopefully, election results will be known this week so we can put one issue behind us.

Economic Reality

The good news is that GDP snapped back better than expected in the 3rd quarter, clocking in at 33.1%.  Initial jobless claims, that are announced weekly, are continuing the trend downward with new claims last week coming in at 751K, the lowest since March.

In the 3rd Quarter, spending on “goods” increased 59% annualized which is significant.  Even at home, you could purchase a washing machine, lawn mower, Peloton exercise bike.  I believe the 2.2 Trillion Dollar Cares Act stimulus was a major contributor.  The issue however is that you probably won’t buy another washing machine or exercise bike anytime soon.

Our “service” sector historically accounts for 60% of GDP and a higher percentage of overall employment in the United States.  Recreation, Travel, Dining and various forms of entertainment are critically important to our economy.  Until we are able to resume these activities, you should expect the economy to not fully recover.  This is the unemployment issue!!

So how do we resume participating in the fun parts of life?  Seems to me, the Coronavirus will still be an issue even after we have a true vaccine, as it will take time to circulate throughout the world.  When listening to CNBC this morning on my way in, it was suggested that developing tests that immediately provide results at restaurants, at airports, at ball games may be the solution.  Perhaps wearing a mask as you arrive, until you test negative will be the policy.

Sound reasonable on the surface!!

Because we cannot see an end, for now, it’s extremely important that another economic stimulus package be passed, geared towards the areas that are still suffering because of the Coronavirus.  Congress will certainly have the opportunity to pass future spending that will address other issues that are not significant in the short-term.  We need the most cost-effective “bridge” until we can see clear.   After this is behind us,  we’ll really need to deal with our finances!!!

Next Week’s Blog?

 I can only speculate what I’ll write about in next week’s blog.  So much can happen with the election that will impact so many areas.  I can’t wait to put in my 2 cents!!

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