Amid The Crisis In The Economy, Two Good Anomalies
(May 1, 2020, 8 p.m. EST) - The U.S. economy in the first quarter of 2020 shrunk by 4.8%, and the second-quarter is expected to be five times worse due to the partial shutdown of the economy.
Consumption plunged at a rate never before experienced, according to the newly released data from the U.S. Bureau of Economic Analysis.
Right now, a severe contraction is underway. The consensus forecast of the 60 economists surveyed in early April by The Wall Street Journal was that the U.S. would shrink 25.3% in the second quarter, and this terrible quarter would be followed by strong economic growth of more than 6% for the next three quarters. These economists are the top names in the field.
With Americans under stay at home edicts in March, and not consuming, the savings rate boomed. And this is not the only anomalous piece of good news.
Inflation is nowhere near the Federal Reserve's 2% target. The inflation index against which the Fed sets policy, the Personal Consumption Deflator (PCED) has been at trending at 1.5% for a decade, and it does not look like we're headed toward the 2% rate of inflation anytime soon. That means the Fed can expand the money supply without worrying much about rousing inflation.
With inflation low even though interest rates are near zero, liquefying the economy through U.S. Government largesse via the Paycheck Protection Program, Supplemental Nutrition Assistance Program (SNAP), and boosting unemployment insurance compensation payments, adds a negligible amount to the long term debt.
The Coronavirus bear market low on the Standard & Poor's 500 index was 2237.39 on March 23, 2020. Today, the S&P 500 closed at 2830.71, down a sliver from last week.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
© 2022 Advisor Products Inc. All Rights Reserved.
- Business Owners Must Act Now On COVID-19 Relief
- Financial Economics With The Epidemic's End In Sight
- The Beginning Of The End?
- An 11.4% One-Week Gain In Stocks
- What Investors Should Expect And A Business Owner Alert
- Is the Coronavirus Bear Market Over?
- What's An Investor To Think Now?
- Will Covid-19 Crisis Be Short-Lived?
- Despite Covid-19, Signals Of Economic Health Continue
- Covid-19: Facts And Perspective For Investors
- Economists Expected Q1 U.S. Growth Of 1.6%; It's 2.6%!
- Stocks Close At New High As Business Owner Optimism Surged
- Retirement Revolution Unexpectedly Is Boosting Economy
- Coronavirus Scare Reveals The Nature Of Stock Market Risk
- Leading Indicators Slightly Off Again