HOT Weather & Hot News!

We certainly know we’re into the doldrums of summer.  Temperatures are forecasting to pierce 100 degrees this week!!

In a “normal year,” we would now be focusing on 2nd quarter corporate earnings, while looking for guidance for the remainder of the year.  NOT THIS YEAR!  Instead, we are waiting for the Hot New Stimulus that is being brewed up in our government.  One thing is certain – our government believes we need at least another TRILLION DOLLARS or so, to keep our economy moving towards recovery.

Some believe we should extend unemployment benefits and continue to pay some an extra $600/week.  Some believe we should have a payroll tax holiday whereas an employee will not have to pay the 7.65% FICA Tax (Social Security and Medicare Tax)….

In either case, we are providing taxpayers more funds than normally working.  I have to wonder, if this was not an election year, what would I be writing about?  I don’t believe there would be nearly as much stimulus being thrown around if this was not election year. So in the end, as this may help our economy move through this challenging period, it will certainly add a ton to the debts we already owe.

I am not suggesting that I believe we should not continue reasonable unemployment benefits.  This is certainly a time where we have many unfortunate people, who should not suffer.

Markets

Last week most markets, except technology, continued the recent melt up.  The Dow Jones increased 2.32%, the S&P 500 1.27% and the Russell 2000 Small Cap 3.57%.  The Nasdaq Composite retreated (1.08%), as some believe that the “stay at home” stocks may have seen their run, for now.  Amazon very quietly has retreated from a high of 3344 to finish last week at 3000, a 10% “correction”.  I’m not too concerned about Amazon at this point.

International developed equities increased 2.20% as tracked by the MSCI EAFE Index.  Some are speculating that International Stocks may now outperform the US because of the combination of cheaper valuations and our Covid-19 situation.  I wish I had kept track of how many years I’ve been told by mutual fund companies that International Equities will outperform the US.  Perhaps this is the year.  As always, time will tell!

What Type of Recovery?

At least once a day we hear someone on the news suggesting the type of economic recovery we can expect.  Many have been saying a “V,” meaning a short, quick recovery back to where we were at the end of 2019…  Some are suggesting a Nike “Swoosh”, a U, L or a W.  I think that pretty much sums up the forecasting.

As I never make predictions, it was logical to believe that when we started to reopen our stores, activity would aggressively move forward.  Pent up demand with money in hand would certainly lead to spending.  Keep in the mind the velocity of money was at zero.  Without a vaccine, wearing masks and social distancing was certainly no guarantee that the number of new daily cases was not going to increase.  We are obviously experiencing many places in the US that are now reaching crisis mode and a reversal of the opening process.  I believe until we have an effective, distributable vaccine, we’ll experience a little back and forth to our economic recovery.  Just hoping the direction remains upward sloping!!!  Perhaps we will then have a new letter!  If I’m wrong and it turns out to be a “V,” that works best!!

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