This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with CMEGroup Chief Economist Blu Putnam.
The big news over the weekend was the president signing a number of executive orders to keep stimulus monies flowing, but Putnam is wary of the legality, and notes it's the states that have to pay at least some of the extra unemployment money, and they're currently tapped out. He suggests viewing the president's actions as less the final word on the stimulus, and more as a continuing negotiation with Congress.
Checking "nowcast" indicators like flows through TSA security checkpoints, restaurant seating/reservation numbers, and commuter rail traffic, Putnam believes the fast economic bounce seen in May and June pretty much stalled in July.
Bottom line: People's behavior has changed - if not permanently, then certainly for at least a significant period of time - and that's going to mean a pretty drawn out recovery. What about a vaccine? Even if one does come, says Putnam, it's not going to be like flipping a light switch.
Turning to monetary policy, Putnam notes the enormous amount of government debt the Fed is now monetizing. It's driven down not just interest, but also rate volatility. That in turn has left investors of all types trying to capture some sort of yield by moving out the risk curve. That's helped create not just a bull market in stocks, but a bull market in gold, which - thanks to the expansive monetary policy - now finds itself more and more correlated with moves in stocks.
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