Week Ending 10/23/2020


  • The US falls while international stocks rise.
  • Strong earnings report.
  • Signs of a weakening employment market.
  • The Covid surge is back in full force.
  • Treasury yields are rising on the long end curve.


Stocks fell by 0.40% in the US as hopes for a stimulus package wavered up and down during the week. Overseas, the markets did better, advancing by 0.60%. Earnings so far have been positive, 83.7% have beaten forecasts and the average earnings have topped expectations by 17%, this is compared to 65% and 3.5% on average, respectively.

The size of the labor force fell in more than half of the 30 states that showed a decline in unemployment rates last month. That is a signal of a weakening labor market. The unemployment rate is a function of people finding new work, those who cannot find work, and others who left the workforce entirely. When people stop looking for work, it pushes the unemployment rate down, even though it is actually indicative of weakness, not strength.

The Covid virus is back at full strength in the US, reaching the highest level since July as communities across the country open up. The virus is now beginning to circulate in higher numbers in rural type areas and people in their 30s and 40s are the main age group, compared to 18-24 in the previous peak. The surge is arriving earlier than was expected. The numbers are also surging in Europe.

The 10-year yield has ticked up to 0.87%, which is the highest yield since June, as the bond market begins to anticipate a Democratic sweep and a massive stimulus bill. The deficit could expand by $5 trillion-plus under such a scenario. The difference between the 10-year and 2-year yields reached 71 basis points on Thursday, which is the most since February of 2018.

China posted 4.9% growth in the third quarter, slower than what was expected but still good relative to the rest of the world. Its growth rate continues to catch up with last year. China is the only major economy to grow this year.



Week Ending 10/9/2020


The market had its best week in three months as US markets increased by 4.07% and international stocks advanced by 3.17%. Investors were cheered by Biden opening up a bigger lead on Trump, hoping that minimizes the chances of a contested election. The consensus is also moving in the direction that a Democratic win will be good for stocks, as it would probably mean big fiscal spending.

The Republicans and Democrats appear to be getting closer to a coronavirus relief package, after Trump shutdown negotiations earlier in the week, only to change his mind a day or so later. Treasury Secretary Mnuchin upped the ante to $1.8 trillion on Friday, while the Democrats have proposed a $2.2 trillion dollar package. There are some Republican Senators who are opposed to a large spending package, so there will still be obstacles to overcome.


The Institute for Supply Management reported that its nonmanufacturing index, a survey which measures services activity, increased to 57.9 in September from 56.9 in August. In Europe, the purchasing-managers index fell due to a rising coronavirus. In Spain, the index fell to 42.4 from 47.7.


The virus is definitely on the rebound in Europe and the US. Eight US states are up 10% week over week. New cases in France are up to 18,000/day. The UK is up 20% from the prior week. The numbers in Spain are also way up. The good news is that we are getting closer to the initial launch of vaccines, probably in December. And there could be emergency approval of a couple of antibody drugs by Lilly and Regeneron that could help bridge the time gap between now and future vaccines. Of course, the rollout of these products will take a while, but we are getting pretty close to the initial launches.


Week Ending 10/2/2020


  • US and international stocks were up by 2.05% and 1.69% but oil falls hard (-7.95%).
  • The first debate marks a new low in presidential politics.
  • Trump tests positive for Covid.
  • Payrolls increase by 660k but that was short of estimates.
  • Consumer confidence jumps higher.
  • This will be a record year for retail store closings.
  • More layoffs announced.
  • A dreary long-term forecast by the CBO


US stocks were up by 2.05% and international stocks were 1.69% higher on hopes for a stimulus bill. Oil slumped by 7.95% on fears of a slowing economy.

Trump and Biden faced off in the first Presidential debate on Tuesday and let’s just say there was nothing presidential about it. It was a new low in presidential politics as Trump just talked over and through the moderator and Biden. Then on Friday, it was announced that Trump had tested positive for Covid. Analysts seem to think this increases the odds of a stimulus bill.

Payrolls were up by 661,000 in September. Leisure and hospitality began to come back to life, adding 318,000. Construction was also strong, plus 26,000. But the total number was 200,000 lower than the consensus estimates. The unemployment rate fell to 7.9% from 8.4% last month, but a lot of that was driven by the fact that 700,000 people left the workforce. Payrolls are still 10.7 million less than the February numbers.

The Conference Board reported that consumer confidence jumped to 101.8 in September from 86.3 in August. It was the biggest increase since April of 2003 and brought the index to the highest level since March. Consumer confidence had dropped in the two previous months due to Covid outbreaks in several states like Florida and California.

A record number of retail stores are closing and will set a record by year-end. Through mid-August, more than 10,000 stores have either closed or there have been announcements that they will close, and that number could shoot up to 25,000 by year-end according to market-research firm Coresight Research. That tops the 9,500 from last year. Six thousand of those closings were due to bankruptcies. That translates into 130 million square feet of space. More than half of that is due to JC Penny, Stein Mart, Bed Bath & Beyond, and Pier I Imports.

US household income fell by 2.7% in August due to a drop in unemployment benefits. Despite the drop, household spending was up by 1% in August, down from 9% in May, 7% in June, and 2% in July. Initial jobless claims fell by 36,000 to 837,000 for the week ending September 26. American Airlines and United plan to proceed with 32,000 job cuts, other job cuts announced were 3,800 by Allstate and 28,000 by Disney.

The long-term growth forecast for the US, released last week by the Congressional Budget Office, is dreary at best. The CBO projects economic growth to average 1.6% over the next three decades. The lowest number since the 1930s. The slow-growth is a result of demographics, productivity, and national debt. Covid has impacted birth rates this year and probably going forward. That, combined with less immigration, and already falling birth rates, means less young Americans to help grow the economy in the future. Productivity is projected to slow due to less business investment and an older population. Exploding national debt will crowd out private investment. The CBO projects that in 2049 debt will be 189% of GDP, from 79% last year.