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So Much Conflicting Data

So Much Conflicting Data

Update: 2020-07-08
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The path from A to B is rarely a straight line. As humans, we like things to be nice and neat and orderly. Linear relationships are simple to calculate. They are simple to understand. We’re conditioned to think linearly. We have been conditioned to forecast the future based on extending a straight line from the past into the future. Most investment graphs imply such an exercise even when the usual disclaimer “Past performance is not an indicator of future performance” is attached.


We are about a month into the so-called economic recovery. Governments the world over have been pumping money into the economy to prevent economic collapse.


But we have conflicting data. The biggest factor affecting the economy is related to confidence. Some restaurants are open. My wife and I observed on the weekend that the outdoor patios had done a good job of spacing the tables far apart. The open air environment reducing the risk of transmission.


The warm weather brought people out into the parks. The parking lots were full and the Police were liberally handing out parking tickets to the cars that couldn’t find a legal place to park.


The beaches were full. The restaurants were busy. But then in California, the beaches were closed this weekend. The number of infections with Covid-19 keep rising in Arizona, Texas, Florida, Louisiana and numerous other hotspots in the country. The opening of the economy in several states has taken a step backwards as the US is experiencing record numbers of new cases each day. Texas and Florida rolled back their re-opening plan. New York City delayed the re-opening of indoor dining in restaurants. Several locations in Arizona also rolled back their re-opening plans. New Jersey is resuming summer camps and in-person graduation ceremonies.


In my home town, the school board is going to be reducing density in the classroom and having students attend classes physically two days a week. The impact on parents who can’t work from home is going to be significant. There will not be adequate child care which will limit the number of people who are able to return to work. As a minimum, some parents will need to stagger their work day so that at least one parent is at home to care for the children. Those single parents who don’t have the support of a partner will really struggle balancing work and raising a family.


The US economy recovered 4.8 million jobs in June and the unemployment rate fell from over 14.7% in April to 13.3% in May and to 11.1% at the end of June. 40% of the gains in employment were in the leisure and hospitality sector which includes restaurants and hotels.


The stock market is up again sharply in early trading this week on hopes that the recovery is taking hold. The market was up 1.1% on Monday morning.


All of these mixed signals are occurring at the same time. The Federal Reserve gave guidance that they won’t be raising interest rates until 2022. Yet the yield for the 10 year treasury note increased at the beginning of the week.


There are no foreclosures or evictions happening, but that’s because they’ve been banned. We have 80,000 eviction cases backlogged in the landlord tenant tribunal in my home province. We have 8% of mortgage loans in the US currently in some form of distress. They’re either in forbearance or in default.


We have some hospitals empty waiting for the onslaught of cases that never materialized. We have other hospitals in California at capacity.


The US has recorded 360,000 new corona virus cases in the past week, that’s an average of over 51,000 cases a day. So far in the past three months, the country has recorded over 133,000 deaths. That’s a terrible statistic.


When this started in February, I predicted that the deep economic impact would be at least 18 months in duration. From where I sit today, I re-affirm that prediction.

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So Much Conflicting Data

So Much Conflicting Data

Victor Menasce