All Posts Tagged: stock market

Consumers Spending Like There Is No Tomorrow

Scott Anderson
Chief Economist

U.S. economic data continues to surprise on the upside through July.

The retail sales report for July reveals a remarkable rebound in retail sales has occurred over the last three months as the U.S. economy reopened for business and government transfer payments bolstered consumer confidence enough for consumers to return to stores with a vengeance.

Nominal retail sales are now above the levels seen before the pandemic started and 2.7% above year ago levels, making a full recovery and then some. This sets up a robust rebound in annualized Q3 real consumer spending growth in the next GDP report.

But it is difficult for me to get too enthused about this fortunate turn of events when the U.S. economy has only recreated about 40% of the jobs that disappeared in March and April. The U.S. unemployment rate still exceeds 10.0%. And surveys show more and more American’s are relying on government support to meet their daily expenses. This vulnerability could become an Achilles’ heel for consumer spending and the U.S. economic recovery in the fourth quarter, if government supports propping up the U.S. economy are further delayed or scaled-back in the quarters ahead.

Some of the retail spending we are seeing in recent months, especially in electronics, autos, and furniture, etc. is likely being turbo charged by rocketing stock market prices, declining interest rates, and pent-up consumer demand as cabin fever reaches unprecedented levels. People are desperate to get back to some semblance of normalcy as they feel they have very little control over this pandemic.

They do have some control over how they spend and what they spend on. But pent-up demand may prove fleeting, especially if the reality of widespread unemployment takes hold in consumers’ psyche or the stock market recovery to new record highs turns out to be just a bear market bounce.

Electronic store sales were also bolstered in July by one time demand from students needing new computers and iPads for remote learning.

Finally, political and policy risk are on the rise as the U.S. election approaches. The ultimate outcome is extremely difficult to predict and the uncertainty alone could begin to weigh on markets, consumer confidence, and spending as we enter the fourth quarter. Enjoy the dog days of summer, because I don’t see clear blue skies ahead.

I guess what I am saying is the U.S. expansion is off to a good start, but it’s too early to take it off government life support. Most of the pillars this retail sales rebound are built upon may be built on unstable ground.

To learn more, check out this week’s U.S. Outlook.

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Why a Soft landing for the U.S. Economy Rings Hollow

Scott Anderson
Chief Economist

With U.S. stock prices near all-time highs, equity investors have already positioned themselves for a soft landing for the U.S. economy and an acceleration in earnings and economic growth next year.

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U.S. Outlook: Are Consumers About to Feel a Squeeze?

Scott Anderson
Chief Economist

We think it’s about to get harder for consumers in the quarters ahead. For now, they actually still feel pretty good about their current job and financial situation.

Consumer sentiment just hit a three month high in October, according to the University of Michigan Survey. Indeed, U.S. households still have a lot going for them. The U.S. unemployment rate just hit a 50-year low.

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U.S. Outlook: Dark clouds loom over the global economy

Scott Anderson
Chief Economist
dark-clouds-manufacturing-outlook

Bad news about the global economy seems to be piling up. Last week the OECD cut its 2019 global growth estimate to only 3.2% from 3.3% forecast just two months ago.

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Investment Insights: April fools rush in

Wade Balliet
Posted by Wade Balliet
Investment Strategy

Our team has continued to enjoy beneficial positioning in the current investment environment, though we continue to be wary of how long such notable gains can last. Financial market fundamentals remain fairly positive in our view, but those may be overshadowed in the future by potential negative factors, particularly from geopolitics.

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