Stimulus, Continued Strength from Manufacturing, and Breaking Down Recent Equity Gains
January 21, 2021 | FIRESIDE CHARTS
Stimulus remains a major talking point this week as the Biden administration settles in on Pennsylvania Ave and unemployment numbers continue to raise concerns. Manufacturing continues to show signs of strength, though that strength is also putting pressure on commodity prices which could have additional ramifications. Stock indices meanwhile hit new record highs this week, driven largely—and unsurprisingly—by tech gains. The most heavily shorted stocks have been charting their own course since November though, and the performance gap is startling. Is a short squeeze approaching? And high volume, stay-at-home investing isn’t just a trend here at home—Asian equity trading volume is at a record high. Meanwhile, governments and central banks across the globe have been laying out cash to combat Covid’s economic effects, but what happens when interest rates finally start to normalize?
1. The Covid factor still has tens of millions of Americans unemployed. Should future stimulus be more targeted to those in dire need?
Source: The Daily Shot, from 1/22/21
2. For those Americans who have not lost their job(s), stimulus is being saved, not spent. These payments are not stimulating much at all while those in need still suffer.
Source: The Daily Shot, from 1/22/21
3. Most measures of U.S. manufacturing have been robust or better. It is a “tale of two cities.” The issue is the Covid factor…those segments of the economy off-line due to practical or ordered shutdowns…
Source: The Daily Shot, from 1/22/21
4. Is a massive short squeeze in the cards?
Source: The Daily Shot, from 1/21/21
5. Two emperors, still no clothes…
Source: The Daily Shot, from 1/21/21
6. Inflation expectations have driven the 5-year TIPS yield to a record low…
Source: The Daily Shot, from 1/22/21
7. …but for the last 20 years inflation expectations have overshot real inflation (PCE)…
Source: The Daily Shot, from 1/22/21
8. The Fed’s near-zero rate policy has allowed for massive Federal debt expansion with little short-term ramifications on the budget. If rates begin to rise to historical norms, will interest payments start to consume the annual budgets?
Source: The Daily Shot, from 1/21/21
9. A global surge in manufacturing is putting pressure on many commodity prices. This producer price pressure is bound to work its way into the CPI and other inflation measures…
Source: The Daily Shot, from 1/22/21
10. It looks like the surge in volume from the stay-at-home investor is not just a U.S. phenomenon…
Source: The Daily Shot, from 1/21/21
11. EM’s market surge looks quite similar to U.S. small cap and technology’s surge. The pace is so fast that we wonder how long it can last…
Source: The Daily Shot, from 1/22/21
12. China’s economy is bifurcated…the north is contracting while the south thrives…
Source: The Daily Shot, from 1/22/21
13. Further confirmation that the central banks are buying the majority of the new government debt issued to fight Covid. Europeans will have to pay this back as well…
Source: The Daily Shot, from 1/21/21
14. Thankfully, the holiday driven surge appears to have peaked. Now the vaccines are racing the new, more contagious Covid strain…
Source: The Daily Shot, from 1/22/21
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.