Soaring Debt (and Its Implications), Muted Inflation, and Some Good News on Manufacturing
October 16, 2020 | FIRESIDE CHARTS
The Philadelphia Fed manufacturing index surged to 32.3 this month, its highest reading since the onset of the Covid-19 crisis, more than doubling both the expected figure and September’s reading of 15. Manufacturing growth has also continued in the New York region and is projected to surge further globally over the next few months, but the services sector is still facing serious struggles. Public debt has surged to historical highs in 2020 and, though it’s yet to spark significant inflation, its presence is sure to be felt in the bond market. And as second (or even third) waves of infection take hold, are global economies prepared to cope?
1. Good news out of the Philly Fed…
Source: The Daily Shot, from 10/16/20
2. …and the NY Fed…
Source: The Daily Shot, from 10/16/20
3. Yet the job losses have been more in the services rather than the manufacturing sectors…
Source: Oxford Economics/ Haver Analytics, from 10/16/20
4. Most reports show manufacturing is growing nicely. It is the service segments and industries that need crowds (theaters, travel, restaurants, etc.) that are suffering the most…
Source: BofA Gloable Investment Strategy, Bloomberg, from 10/16/20
5. Massive QE and money supply expansion has not ignited inflation…yet…
Source: The Daily Shot, from 10/16/20
6. A darn good question…perhaps the answer is: “For as long as central bank QE can cover the new gov’t bond issuance”…
Source: The Daily Shot, from 10/15/20
7. As we have noted, state and municipal budgets must be balanced each year. Given Covid-related tax revenue declines, muni issuance to cover these shortfalls should be massive…
Source: The Daily Shot, from 10/15/20
8. Are yield-seeking investors taking on more risk than they know?
Source: The Daily Shot, from 10/16/20
9. Not only is inflation tepid in the U.S. and Europe (see Wednesday’s blog), China’s CPI trend is also looking bleak…
Source: The Daily Shot, from 10/15/20
10. Will Europe’s second Covid surge derail their economies again?
Source: The Daily Shot, from 10/15/20
11. Yes, we are all tired of Covid. But it is still real, and it does have a profound effect on economies…
Source: The Daily Shot, from 10/15/20
12. Unfortunately, the prediction that Covid will mirror the 1918 flu pandemic is coming true:
Source: The Daily Shot, from 10/16/20
13. Here is the U.K.’s Covid infections to date:
Source: JHC CCE, from 10/16/20
14. Here are the Covid infections in the U.S. With 2 stage-3 vaccine trials on hold, disciplined mask-wearing and social distancing may be our only defense this winter…
Source: JHC CCE, from 10/16/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.