U.S. GDP Climbs 7.4%, ~23 Million Still Unemployed, and Few Options Remain to Buffer Against Volatility
October 30, 2020 | FIRESIDE CHARTS
U.S. GDP rose 7.4% in Q3—a record 33.1% annualized rate—but it still has a lot of ground to cover to break even after Q2’s historic 9% drop. That may be difficult as Covid-19 rates set records across the U.S. and nearly 23 million Americans remain dependent on unemployment assistance. Meanwhile, the tech giants reported strong earnings yesterday, but could the sector soon run into some issues reminiscent of the Y2K era? And as equity volatility ticks up, traditional diversifiers are offering less support. Will the trend continue as earnings season rolls on?
1. While the third quarter saw the largest-ever percent gain in GDP, don’t forget investment math (the larger the loss, the larger the gain required to break even). We still have a long way to go!
Source: The Daily Shot, from 10/30/20
2. Almost 23 million Americans are still out of work…
Source: Oxford Economics/ Haver Analytics , from 10/30/20
3. Inflation usually is driven by wage increases, energy price surges, or by importing inflation from abroad. None of this is happening which is why we don’t see inflation as a short-term problem…
Source: Bloomberg, from 10/29/20
4. Will the pandemic’s technology and e-commerce demand pull from future revenue cause a in revenue in the near future, similar to tech stocks post Y2K?
Source: BCA Research, from 10/30/20
5. Are the retail Covid stay-at-home crowd, who trade emotionally, adding to the volatility?
Source: The Daily Shot, from 10/29/20
6. Traditionally less volatile sectors also provided no relief…
Source: The Daily Shot, from 10/29/20
7. Gold, often touted as the “great diversifier” due to its low correlation to stocks, also provided no relief. In times of market volatility, risk assets tend to correlate towards 1…
Source: The Daily Shot, from 10/29/20
8. Are ultra-low interest rates “prohibiting” bonds from acting as the traditional hedge to stock declines? Remember when most bonds lost ~20% during the first Covid rout?
Source: The Daily Shot, from 10/29/20
9. It has been a tough decade for commodities. What will drive the next commodity cycle?
Source: The Daily Shot, from 10/30/20
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.