6 month update
I thought I would do a quick follow up to my April report on the US economy. I had my six-month briefing and things are better but still far from being good. As you may have seen the US stock market has been going up and down throughout October as the election cycle comes to a close. The New York Stock Exchange, the S&P 500 and the Nasdeq have all been fairly strong despite the unemployment rate high of 14.7% in April to 8.4% in August, the hospitality industry devastated and in COVID-19 wave 2 or 3 depending on which state you are in and which statistics you look at.
The US Stock markets are all future gains. Investors are trying to predict gains and losses into the future based on their own investment timelines. Stocks have been floated heavily by the technology sector. There has been a shift on these stock markets pulling on and off companies already from their listings. And, there is the US Federal Reserve Bank whose priority is to make enough liquidity available to stop the stock market from crashing again. Its swift actions in March and April has held the stock markets together all through the summer and fall.
The US Federal Reserve Bank has been buying corporate, state, municipal, and foreign debt to the tune of $2.3 trillion and likely will buy more. It has kept interest so low it is unlikely to rise anytime soon. There is concern about massive inflation but that seems unlikely. About 90% of the world business transactions uses the US dollar, so there is a lot of dollars floating globally in physically and in electronic transfers. US debt has matched GDP, which on surface looks a like a problem, but there are countries like Japan (3rd largest economy) and Singapore (3rd largest GDP per capita) which are both over 200% debt to GDP, and the US can keep printing money with less inflation impacts then both those countries.
Like the rest of the world, US hospitality has seen about 23% losses total, but depending on which state you are in that can be as high as 50%. Other industry notable losses from April to August are information technology 10%, professional and business services at 6% and education and healthcare at 5%. This again varies from state to state. With telecommuting being used at such high levels and the closer of restaurants and retail, at some point there will be a commercial property valuation adjustment. Some of the adjustment in remote working that we have acclimated to be permanent way even with a COVID-19 vaccine or therapeutic. People with means are leaving the big cities to move to less dense communities which will result in residential housing and rentals shifting up and down in price over the next year.
The August US GDP forecasts from the various economists are:- Federal Reserve is at -6.5%, Wall Street Journal’s survey average is -4.2%, the Economist is -5.4%, Goldman Sachs is -6.5%, and Morgan Stanley is -3.4%. The 2021 forecasts is the Federal Reserve is at 5.0%, Wall Street Journal’s survey average is 4.0%, the Economist is 4.0%, Goldman Sachs is 6.2%, and Morgan Stanley is 6.4%. This is far from being etched in stone. This can all change again depending on COVID-19 infections, what the US and other countries do on future stimulus, the decision of countries’ central banks and when a therapy or therapeutic is developed.
Other than China, which is projecting positive GPD growth by the end of 2020, expect all countries’ economies to continue to struggle. This is a constantly changing fluid situation on a global level. Stock market speculation will continue as it always does. You can expect wide shifts daily. However, the US Federal Reserve will do everything it to ensure enough liquidity to keep a collapse we saw in late March. Post US elections, there will be some form of a stimulus package coming out of DC. Nearly every US economist agree that there needs to be another direct infusion of federal money directly into both the general economy and state governments. | |
