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What’s Eating Mo? 9/21/2020

 

Fed Officials Pushing for More Stimulus

Following new research, U.S. officials are saying that spending, rather than low rates, would do more to prevent deeper economic issues from the COVID-19 pandemic.

The U.S. Consumer Price-Index rose 0.4%, making for a third straight month of gains.  Inflation is still well below the Federal Reserve’s 2% target, a goal that has been a top priority. Because of this, interest rates are expected to stay very low (close to 0) through 2024.

Research from Michael Woodford, a Colombia University economist who has an influential voice among central banking circles, has shown that even with the Fed holding rate cuts, government spending would be more effective than monetary stimulus.

The challenge that comes along with a recommendation for government spending is the idea that housing and technology, areas not hurt as bad by the pandemic, may see overstimulation through government spending.

 

Iowa Leading Indicators Index shows increase in July

The Iowa Leading Indicators Index (ILII), used by state officials to forecast tax revenues, increased 0.1% to 103.3 in July.  This is the first month of positive change after seven months in a row of declines.

 

International Trade Shows Signs of Return 

In a much faster return than the 2008 financial crisis, overall world trade is seeing a bounceback. A large part of this resurgence can be attributed to the expansion of e-commerce in recent years.

 

 

U.S. Housing Market at Historic Lows

The end of July saw only 1.3 million single-family homes on the market, the lowest number for a July since 1982. A change in employment or income, the idea of walking through a strangers house in a pandemic, and fear of not qualifying for new mortgages are likely contributing to low housing supply,

 

 

 

 

What’s dragging the market down

  1. PandemicThe U.S. is about to pass 200,000 coronavirus-related deaths.
  2. ChinaOver the weekend, Beijing released penalties for its “unreliable entities” list, which will target foreign individuals and companies whose actions are viewed as a threat to Chinese interests.
  3. PoliticsThe U.S. is 42 days out from the election, but investors are prepping for a drawn-out result that could take months.
  4. ScandalSunday’s bombshell reportthat major banks continued to move large sums of dirty money despite red flags was another blow for financial stocks already bruised by falling bond yields and near-zero interest rates for the foreseeable future.

 Soaring wealth during pandemic highlights rising inequality

Together with all other U.S. households. In Q2, the net worth of American families rose 7% to an all-time high, according to Fed data released yesterday.  Data underscores fears of a K-shaped recovery—where the “haves” bounce back but things get worse for the “have-nots.”

 

Cashman’s Comments: EVERYTHING is being politicized as never before.  RBG had barely breathed her last before the Party hacks were casting lots for her seat.  The Federal Reserve, historically apolitical, has entered the fray by advising fiscal stimulus.  Candidates for political office are shamelessly attempting to buy votes.  Whether the Big Ten will play football is beginning to look like a safe bet compared to the rest of this chaos.

The dust will not begin to clear until well after election day.  The potential for unintended consequences seems massive.  We will need to be very nimble, flexible and adaptable to see through all of the dirt that is being thrown into the air. Change is not coming – it is here.

 

“Dissents speak to a future age. It’s not simply to say, ‘My colleagues are wrong and I would do it this way.’ But the greatest dissents do become court opinions and gradually over time their views become the dominant view. So that’s the dissenter’s hope: that they are writing not for today, but for tomorrow.” 

 

–The late Supreme Court Justice Ruth Bader Ginsburg