While we continue to see a decline in new daily COVID-19 deaths, the pandemic’s psycho-social effects are growing. The country’s rate of anxiety has tripled, and depression has almost quadrupled. On top of that, parents are concerned about the risks for their young children not attending school in person.
Emotions are also running high around the 2020 election — which is only three months away. As expected, the Democratic and Republican National Conventions both sparked a significant uptick in polling.
Now, let’s move on from current updates to Economic data.
Retractions Against GDP Growth
There was a retraction against GDP growth due to employment information. With the latest data, new weekly claims have been above the one million mark for 21 of the last 22 weeks. I do not want to make too much of the difference between last week’s number, just under a million, and this week’s number, just over a million, but the continuous increase suggests that there are more serious problems in the economy.
Anyone getting laid off now is not likely to have a job to go back to for a while until the lockdowns are lifted. Many marginal businesses simply cannot survive any longer being shut down or seeing limited street sales. They are pulling the plug.
Price Indexes
For those who don't think there is a price explosion at the consumer level for goods people want to buy, just take a look at the price chart below.
The general price indexes released by the government, at this time, are not picking up the very strong spikes in consumer goods and services purchases. Still, sales online and in person are booming.
Money Supply
What happens from here all depends on federal activity. If the Fed expands money supply again, you will be back in the stock market at 100%. If the money supply slowdown intensifies, you will take even more profits. Volatility may not be our friend in the short-term, but it will provide a wide opening for major opportunities in the long-term.
The Federal Reserve on the Money Pump
We now know that Federal Reserve officials said at their meeting last month they expected the economy would require greater government support to recover from the coronavirus pandemic.
Minutes from the Feds July 28-29 meeting released Wednesday, officials started to believe more government spending would be needed to prevent a longer downturn as a result of the lockdowns across the nation. A number of officials also believed more stimulus from the Fed could be required.
Near Term Relative Strength
Gold is not the only asset giving back recent gains. There is a rotation away from technology as well. This is likely some fear coming out of the market. The beneficiaries have been small and mid-cap as well as unloved stocks in the S&P 500. This means many of the stocks in the market have some runway here.
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Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.