The corner has been turned with the global pandemic as the vaccine calvary gallops towards defeating the coronavirus. I read that the first doses of the vaccine will be distributed in December with larger distributions projected in the April/May time period for the general population. Volatility metrics also kept declining this week which means the anxiety around the Presidential election is evaporating which bodes well for the stock market.
Now, we are left to consider the aftermath for the economy. What is interesting is that there are likely permanent changes that were already underway but accelerated by the pandemic. Here are a few things to consider:
- Work from home. Creates a better work/life balance and you get to see your kids. Who would want to give that up?
- Video conferencing. I remember the novelty in the mid-1990s of having a meeting with colleagues in another city which never really caught on as the technology was clumsy. With the ease of an APP like Zoom we have all migrated to teleconferencing as a part of doing business. Personally, I have found it to be more efficient but I do miss the face-to-face interaction.
- Cloud computing is now in the spotlight. If you can’t access your data/work from home then something feels wrong in your life.
- Productivity. Working from home means you pick your hours but you probably end up working more hours. Your boss loves this.
- Commercial real estate is the loser. Cities across the country will see a secular change in how office space is utilized. Already I know of friends in the NYC area that work at financial institutions that now understand they rent way more space than is necessary to run their operations.
- Eat at home. Restaurants have taken the brunt of the economic pain and there is a question as to whether we are used to eating at home or can’t wait to eat out again. It all depends on wether you trust your eating establishment to be trustworthy in terms of cleanliness as we are all germaphobes now.
- Mobility. We can move and this means a shift away from living in the city to the suburbs. If you can work anywhere you can live anywhere. I hear Maine is nice.
- Whatever else I didn’t think of but there will be lots of changes which we will cause pain for certain sectors and add a lot of efficiency to others.
And now the chart of the S&P 500. I am posting a short-term chart this week as nothing noticeable happened in the longer-term outlook. As you can see, the S&P 500 has see-sawed for most of the past 2.5 months. Typically, consolidation periods are a resting period before the trend continues higher.
Chart of the Week!
Coronavirus cases are on the rise as we approach the colder winter months. The epi-center of the virus in the spring was New York but Florida, Texas and California are now the states suffering from the highest numbers.
Economic & Central Banking Snippets
- The October Cass Freight Shipments Index rose 2.4% y/o/y, the first positive read since November 2018. Much of the strength is due to the rise in imports. (Boock Report)
- Asian economies are emerging as clear winners in the race to a full recovery, aided by demand from Western shoppers and success in containing Covid-19, which has helped the region keep its factories humming, Eun-Young Jeong reports. (WSJ)
- Initial jobless claims rose to 742k from 711k last week (revised up by 2k) and that was 42k more than expected. There are two key programs Congress passed this year to expand and enhance unemployment insurance that will expire on January 1st, leaving millions of people without benefits unless lawmakers can break a monthslong deadlock over a fresh round of pandemic relief. (WSJ)
- U.S. single-family home construction rose to the highest level in more than 13 years last month. The latest figures are more evidence that rock-bottom mortgage rates, greater opportunities to telework and a quest for more space to ride out the pandemic are supporting the housing market—and the broader economy.
- US industrial production in October rose 1.1% m/o/m, one tenth more than expected and September was revised up by 2 tenths. Manufacturing was better than forecasted when we include the upward revision to September. Capacity utilization also rose to 72.8% from 72%. (Boock Report)
- Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction. Lumber futures have shot up 24% so far in November, closing Thursday at $616.90 per thousand board feet. That’s a lot lower than the record $1,000 hit this summer during America’s pandemic-induced lumber binge. But it is nearly 90% more than the typical price for boards delivered in January. (WSJ)
- Pfizer and BioTech are submitting requests for emergency use authorization of their COVID-19 vaccine candidate to the U.S. FDA. This will potentially bring the vaccine, which has shown to be 95% effective, to high-risk populations in the U.S. by the middle to end of December 2020, according to the press release. (Investopedia)
- Saudi Aramco, the world’s biggest oil company, is set to return to the bond markets for the first time since April of last year as it seeks to fund a $75 billion dividend commitment. Aramco, which hired banks including Goldman Sachs Group Inc. for the sale, needs to raise debt after slumping crude prices caused profit to fall by 45% in the third quarter. (Bloomberg)
- The coronavirus pandemic has transformed how American consumers behave by accelerating their embrace of digital commerce, and the changes are likely to prove permanent. A recent survey by consulting firm McKinsey & Co. found that about three out of four people have tried a new shopping method due to the coronavirus and that more than half of all consumers intend to continue using curbside pickup and grocery-delivery services after the pandemic is over. Nearly 70% of consumers surveyed intend to continue buying online for store pickup. The pandemic collapsed into three months a process of adopting e-commerce that otherwise would have taken 10 years in the U.S. (WSJ)
- Amazon.com Inc. unveiled its biggest push into selling prescription drugs with the launch of a digital pharmacy and discounts for paying U.S. Prime members that sent shock waves through shares of drugstore chains and distributors. The e-commerce giant on Tuesday unveiled Amazon Pharmacy, a section of its retail website and mobile application that lets people order medication. (Bloomberg)
- Airbnb has filed its prospectus to go public, saying it will debut on the Nasdaq under the ticker ABNB. The company reported revenues of $1.34 billion last quarter, down nearly 19% from the same period a year ago. Nonetheless, it disclosed $219 million in net income despite primarily turning net losses in the past. (Investopedia)
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President – Kisco Capital