As vaccines continue to be administered the end of the pandemic appears to be at hand. People are resuming normal lives and pent up demand is being unleashed. Consumers are looking forward to a summer filled with travel and congregation with family and friends. Even the Fed is noticing the brighter outlook. The world is opening back up but it probably won’t ever be the same as it was before the Pandemic.
The Year in Review: 2020 was an unprecedented year and The Transcript covered the economy throughout all of its twists and turns. Even though China was battling Covid in 2019, no one really knew what was in store for all of us in 2020. Technology, capital markets, and housing were three industries that boomed. While the stimulus was integral, the economic hero of 2020 was the US consumer. Optimism is high that 2021 will be a more normal year.
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Succinct Summary: Capital markets are ending 2020 with a bang thanks in part to last week’s hot IPOs. Business leaders are feeling confident about 2021 and expect next year’s earnings to exceed 2019’s. Consumer spending is similarly strong. Even the housing market is stronger than in ’05. It’s a K shaped recovery for some industries but a vaccine should unleash pent up demand and high unemployment means that interest rates will stay low for longer. Readers should keep an eye on growing supply chain bottlenecks. This could be a source of some inflationary pressure.
Editor’s Request: This weekly newsletter is made possible by donations from our readers. If you like what you are reading, click here to donate (Our suggested donation: $10 per month). Help us keep The Transcript going.
Succinct Summary: The economy has improved a lot since the bottom, and headline economic activity is nearing a full recovery. However, the recovery has not been shared equally. There have been a small number of big economic winners and a much larger number of economic losers from COVID. This will help keep the government pushing for more stimulus for a long time. In the past, this stimulus has tended to help the winners even more.
Editor’s Request: This weekly newsletter is made possible by donations from our readers. If you like what you are reading, click here to donate (Our suggested donation: $10 per month). Help us keep The Transcript going.
A Personal Note: A lot has happened in the last two weeks we have been away. We start on a very positive note—warm congratulations to my co-author Scott Krisiloff and his wife on the birth of their beautiful twins this past week. On a different note, the challenge of racism has come to the forefront of global news. This week, we have a special section on quotes on the reactions from corporate management teams on the issued of racism. The bottom line is that we have a problem that needs fixing. I have also written a personal article about my experience of racism in Scandinavia. – Erick Mokaya
Succinct Summary: There are some glimmers of hope across such industries like airlines, travel and retail as demand picks up from the April lows. We are, however, being cautioned about being too excited and urged to be cautious. All in all, there is significant pent-up demand.
Succinct Summary: The Coronavirus continues to spread globally and no one knows how bad this could get. On the one hand we have projections of its exponential growth. On the other is the hope that seasonality will help stem the tide. In the face of a potential pandemic, the health of the economy seems like a trivial concern. Still, this panic is having a material affect on economic activity and thereby markets. The Fed has tried to address this with lower rates, but even the Fed admits monetary policy can’t do much to stop a virus. Where monetary policy will fail, hopefully modern medicine will succeed. Everyone, stay safe out there!
Succinct Summary: The consumer continues to show strength with higher holiday spending. Business spending isn’t quite as strong though but companies, especially small businesses, are optimistic. As such, most CEOs don’t expect a recession in 2020. Historically, presidential election years are usually good for the stock market.