An Expensive 2020: Fiscal Stimulus, Quantitative Easing, and Global Market Price Tags Continue to Climb
December 11, 2020 | FIRESIDE CHARTS
Vaccine distribution in the U.S. is inching closer, and it can’t come soon enough. The recovery has stalled, unemployment is climbing once again, and national debt has surged to unprecedented heights even before an additional stimulus package, for which negotiations have broken down once again. Markets aren’t operating at a discount though—stock, bond, and commodity prices have all climbed rapidly above their long-term averages this year. Are the markets getting ahead of themselves though when many remain so dependent on central bank intervention? The ECB just massively increased its QE efforts and by ~$600 billion and the combined QE price tag of the four major central banks is even more staggering… There looks to be a debt crisis brewing in China as well—what happens when these bills come due?
1. Stating what has become obvious, the latest surge in Covid is showing up in measures of the economy/recovery…
Source: Oxford Economics, from 12/10/20
2. Covid will make unemployment worse before the vaccines make the pandemic “go away”…
Source: The Daily Shot, from 12/11/20
3. While the U.S. consumer is in much better shape than before the Great Financial Crisis, corporate & government debt has surged to levels never seen before, even as a percent of GDP…
Source: The Daily Shot, from 12/10/20
4. Are the stock bourses getting ahead of themselves?
Source: The Daily Shot, from 12/11/20
5. A sign of the times… the new versus old economy…
Source: The Daily Shot, from 12/11/20
6. Is this 1999 all over again?
Source: The Wall Street Journal, from 12/10/20
7. The ECB added another ~$600 billion to its QE yesterday (details below)…
Source: The Daily Shot, from 12/11/20
8. …This brings the total “major” central bank QE totals to ~$28 trillion. That’s $28 million million… Who will pay for all this?
Source: The Daily Shot, from 12/11/20
9. The Chinese economic recovery is using a lot of debt to stimulate/propagate growth…
Source: The Daily Shot, from 12/10/20
10. But is the level of debt accumulation going to cause a Chinese financial crisis down the road?
Source: The Daily Shot, from 12/10/20
11. Is it time to revisit China’s classification as “emerging”? How can the world’s largest economy, in the aggregate, be deemed emerging?
Source: The Daily Shot, from 12/11/20
12. Despite the rally, EM ETF flows have been anemic. The next market to lift-off?
Source: The Daily Shot, from 12/11/20
13. This trend will certainly help EM economies where much of the raw materials are mined/harvested…
Source: Bloomberg, from 12/11/20
14. Please try to remember those in need this holiday season…
Source: The Washington Post, from 12/11/20
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.