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The Most Important News Investors Need to Watch Over the Next 2 Weeks

The Most Important News Investors Need to Watch Over the Next 2 Weeks

Posted On July 29, 2020 12:32 pm
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It’s been a wild year for investors. The market began with a continued rally following 2019’s 31% gains, saw the fastest bear market in history, with March’s 34% plunge, and then a V-shaped stock market recovery.

(Source: Ycharts)

The S&P 500, Dow Jones Industrial Average, and Tech-focused Nasdaq, have seen remarkable gains since March’s lows.

But one thing, in particular, has driven that rally, hopes for a V-shaped economic recovery.

A recovery that no economists in months have actually expected to happen.

In this two-part series, I’ll explain why the next two weeks are likely to prove critical to how the US economy will fare in the coming years, which has important implications for stocks that are currently in the craziest bubble in history.

Hopes Of A V-Shaped Recovery Are Dead

Just because economists didn’t expect a V-shaped recovery doesn’t mean one might not have happened. After all, the US economy in recent years has tended to beat to the upside.

However, recent high-frequency data has pretty much driven a stake through the heart of even the most optimistic economic forecasts.

(Source: CNN economy tracker)

After falling for 15 straight weeks, new weekly state unemployment claims ticked higher last week. And those are just the headline numbers Wall Street pays attention to.

The actual facts reveal a labor market that continues to be, what one economist called in April “a house of horrors”.

When you factor in contractors and gig workers, who have to file for unemployment with the Federal government, new unemployment claims have been stable at about 2.4 million per week for the last two months.

(Source: Jeff Miller)

We have 32 million Americans currently collecting unemployment and another 2 million or so have filed but not yet been processed. In other words, about 34 million Americans are currently unemployed, roughly six times as many people as there are job openings right now.

For context, the labor market was 164.8 million pre-pandemic meaning about 20% of the pre-recession workforce remains out of work.

             34 Million Unemployed vs 5.4 Million Jobs 

(Source: Ycharts)

How stressed are US families right now? The US Census Bureau performs weekly “Pulse” surveys of both small businesses and households to track the microeconomic impact of this recession.

(Source: US Census Bureau Household Pulse Survey)

50.1% of households report a decline in employment income relative to pre-pandemic levels. That ranges from 32.3% in Nebraska to 64.8% in Los Angeles.

That’s not so surprising given that states alone have reported 53 million job losses since this pandemic began. What is potentially worrying is that another 35.1% report expecting income to drop over the next month.

(Source: US Census Bureau Household Pulse Survey)

That ranges from just 15.7% in South Dakota to frightening 53.6% in Hawaii.

What does this level of income insecurity mean for households and consumers?


(Source: US Census Bureau Household Pulse Survey)

That 10.8% of households report not having enough to eat over the last week.

That’s up from 9.8% 11 weeks ago and ranges from 2.7% in Vermont to a third world like 21.0% in Mississippi.

It means that 40.6% of households report delaying medical care over the past month, up from 38.7% 11 weeks ago. That ranges from 24.5% in North Dakota to 53.4% in Philadelphia.

(Source: US Census Bureau Household Pulse Survey)

Perhaps most concerning is the fact that 26.4% of American households report housing insecurity, with a range of just 7% in Vermont, to 46.4% in Mississippi.

(Source: US Census Bureau Household Pulse Survey)

In other words, in Mississippi, about 21% of people report going hungry, and almost half are worried they could become homeless relatively soon.

These worrying survey results have been generally trending steadily worse over the last 11 weeks, during which the stock market has been partying like pandemic is over. In reality, medical experts say it’s likely to continue into 2022.

In an economy where 65% to 70% of GDP is driven by consumer spending, you’d expect such terrible microeconomic data to lead to falling spending, and the high-frequency data is starting to confirm this.

The Economic News Goes From Bad To Worse

Continue Reading Here 

About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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