It looks like it will be a while before we have the next round of stimulus checks coming from the government as both the House and Senate are on vacation for the rest of August. They could reconvene if negotiators strike a deal but neither side seems particularly interested in compromising at this point. In spite of the stalemate, the market was generally steady, finishing slightly up for the week on improving economic data.
Here are the top three things we’re covering this week’s blog:
1. The Market
· The S&P was up 0.64% on the week while the Nasdaq 100 was up 0.22%. These are pretty tame numbers given what we have seen lately as the market is digesting relatively good economic data while weighing that against the lack of a stimulus agreement.
2. Economic Data
· New claims decreased last week and came in at 963,000, the first time below 1 million since early March. This is a positive sign but still a long way away from anything that looks like normal.
· Continuing claims came in at 15.5 million last week. This is also a nice improvement and showing signs that there are signs of life in the economy that can turn into a larger trend.
· Total Claims for Unemployment from all programs came in at just over 28 million, a larger improvement from the 31 million last week. Like the others, I am looking to see if these types of improvement will become a trend and see these numbers steadily decline or will this begin to flatten out.
· Last week we also saw a relatively good Retail Sales report showing a Year of Year (YoY) growth of 2.7%. After a large drop in March through May, we are seeing improvement here. My only concern is that the large improvement in Q2 came on the back of the largest stimulus package every provided to businesses and individuals. What happens if the next stimulus package continues to be delayed and what is the impact if it is much lower in total dollars for Q3?
· Another important area of the economy to look at is Industrial Production. While we are seeing improvements here, it is still down over 8% YoY. As you can see back to 2011, it can take much longer for Industrial Production to fully recover than the stock market or the economy as a whole so while troubling to see it down so much still, it is not necessarily indicative of where things will go from here.
3. Stimulus on Hold
· While earlier weeks had headlines of how close a deal might be, we are now seeing the opposite with no deal in site. It seems both sides are focused on the political talking points than getting parts of the package they agree on passed. While the negotiators will continue to work on a deal, the pressure from the individual legislators is much less as they are not being held up from their vacations while many Americans are now waiting and wondering if and when any financial support will be coming for them. Whether or not you agree with the level of benefits that should be provided, there has not been a problem in getting Billions in funding to large corporations to support their balance sheets with very little or no oversight, yet there seems to be no urgency on how to figure out how to support over 25 million individuals filing for unemployment. While Congress delays, President Trump continues to announce plans to send out stimulus payments, and it is yet to be seen if he has the power to do so.
· In looking back at the positive economic data for the last few months, much of that was built off of these stimulus checks getting into the hands of individuals combined with their ability to defer debt and rent payments into the future. As you see on the chart below, many of these forbearance programs are ending over the coming weeks and months and these bills will be coming due.
Even if a new stimulus deal is passed, those extra payments may need to be used for paying back debt and rent and not be available for retail expenditures.
Articles of Interest
· Did you hear about Kodak? – No, not the camera/film company, the pharmaceutical start up? While there are many more articles that might better cover the technical side of this, I wanted to share an article that is a bit more pointed on the cronyism that has so many questioning our financial system.
· Stimulus Talks Stuck in a Ditch – This article goes into more detail on the state of the stimulus talks and where things may go from here.
Social Media Post of the Week
· I had the pleasure of getting to present in from of over 50 advisors this week about the work we are doing with business owners and the process we have put into place based on my 19 years in the business. We will be sharing more about this a we rollout new these now tools in the next few weeks!
· Don’t forget to follow us on your favorite Social Media Feeds!!
Non-Financial Story of the Week
My wife got a well-deserved couple of days away with a good friend of hers and I had the 2 kids all weekend.
While my initial plans for the weekend and all the projects I planned to get done were put on hold, it was great to get the chance to spend so much time with them!
They are growing up so fast!
While there is still a lot of uncertainty out there with no stimulus deal and an election season that is likely to be one of the most volatile ever, the economic data that is coming in right now is showing signs of life. The biggest risk to this is that we see this data level off or begin to weaken again rather than continue in any sort of V-shaped trajectory. What is most important right now is that your investment strategy is aligned with your own personal appetite for risk and with your goals. We have been using a great new tool with our clients to better understand how our clients are feeling about this right now and are adjusting their allocations based on that. Not surprisingly, most are still anxious about the economy and prefer to stay somewhat cautious overall but strategic in how we are allocating to investments we feel will do well in environment we are in right now.
If you have any questions about any of the information in this week’s blog or what you should be doing right now with your personal and business planning, do not hesitate to reach out to us by sending an email to email@example.com or calling us at 253-236-7000.