I Hope I'm Wrong

The U.S. stock market and the economy are diverging.  35 million Americans are unemployed and underemployed - approximately 20 percent of the workforce is without full-time employment.

Covid-19 cases topped 1.3 million and more than 70,000 Americans have died. States are heading toward Phase 1 or Phase 2 reopening of local economies.

The Fed and Treasury programs are in place. Securities markets have been lubricated and lending facilities supported.

The CARES Act and associated programs (PPP, EIDL, PUA) are being implemented. Unemployment Insurance, both old style and new, is ramping up.  Even the $1200 checks are arriving in bank accounts and mailboxes.

Sam Zell, Warren Buffett, even Larry Fink, have sounded the alarm.  Each express concern for different reasons, but all highlight general uncertainty, structural issues, and the greatest unknown - U.S consumer behavior.  Behavioral economics for short.

The PPP provides 8 weeks of cushion to small business, but what happens in week 9?

What long term damage has been inflicted? 

Will the U.S. consumer chose to save rather than spend, as citizens did for 30 years post the Great Depression?

I fear tough times ahead. I worry the end of the 11 year expansion will be far more painful than anticipated by most. I hope I am wrong.

We are joined by Kaushik Saha, SVP of Quantitative Research at Hercules Investments.

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#covid19 #behavioraleconomics #caresact #nativeangelino

Special thanks for their sage words to: Mel Brooks and Professor Richard Portes.  

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