It’s hard to remember that there’s still a pandemic going on. Vaccination rates have increased and it looks like we may be on the cusp of a roaring 20s. Consumers are healthy and eager to make up for lost time–booking travel and eating out. Offices will probably re-open by the end of summer but working from home is likely to remain an option.
Vaccines continue to be administered and supply will likely open up, even more, starting in April. Consumers have been dreaming of a return to normal and we appear to be at the cusp. The result of vaccination could be an explosion of pent-up demand for hardest-hit industries and a much better second half than people expect. Still, strong demand is putting pressure on supply chains and creating inflationary pressures. Given that stimulus is dependent on a K-shaped recovery, normalization could bring its own economic disruptions.
Markets went haywire last week thanks (so the story goes) to some retail traders in a Reddit forum led by a man named Roaring Kitty. It was hard to pay attention to much of anything else in capital markets, but it was also a busy week for earnings. Industrial companies said that demand was “very, very, very strong” and there was an abundance of commentary on price pressures. Jerome Powell isn’t worried though. Game on!
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: Consumer spending remains strong and Black Friday was successful. A third wave of COVID has made the near term outlook worse, but the medium to long term looks much brighter thanks to vaccines. Tech spending continues to outpace overall GDP growth and probably will continue to surge after the pandemic is over. The driver of spending has moved from devices towards data infrastructure and management.
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Succinct Summary: Retailers reported strong quarters last week showing that the US consumer remains resilient despite high unemployment. A new wave of Covid could slow the economy back down but vaccines are almost here. It will be interesting to see what behaviors have been permanently altered by the pandemic and which ones will return to the way that they were. Business travel is one thing that may be permanently changed.
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Succinct Summary: Pfizer announced that its vaccine is 90% effective and that gave a boost to market confidence. The vaccine could be great news for the industry and great news for society. Pfizer says that it will have over 1B doses ready next year. The vaccine could lead to some reflationary outcomes.
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Succinct Summary: Most parts of the economy have normalized and the economic winners are booming. Technology, cloud service and e-commerce are leading the way and other industries are surging as well. Financial service firms focused on M&A advisory, trading and restructuring are seeing strong business. The housing market is also on fire with new home sales up 32% y/y. This week’s election and a renewed wave of COVID could dampen activity, but for now, the economy is doing remarkably well. COVID may have led to structurally higher productivity.
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Succinct Summary: The economy continues its two speed recovery, but there are some signs that growth may be slowing. Even companies that benefitted from the pandemic, like Netflix, are seeing the after-effect of demand that was pulled forward to earlier in the year. Elections will be a key source of uncertainty in the coming weeks. And COVID infections are stubbornly high. But consumers are going crazy at home.
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Succinct Summary: The economy has had a strong but incomplete recovery. The worst seems to be over but there’s still a long way to go. For many industries, this looks like a K shaped recovery.
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