By: Todd Wheatley
(c) IQ-2k   11-20-20

Taking note of my ECONOMIC APOCALYPSE 2020 series the reality was directly opposite. Instead of a horrific economic decline the U.S. actually had a V_SHAPED RECOVERY with phenomenal job growth and consumer spending to rival past recoveries. It's really good news as we enter the holiday season. Unless you factor in the spike in COVID cases and the longevity of purchased "goods". With that in mind a winter slow down will likely take effect .... WEATHER NOTWITHSTANDING.

Very cold winters mean a drastic slow down while a very warm winter will moderate even a COVID slow dwon. Digging deeper, CONSUMER PSYCHOLOGY remains the main concern. The second and third quarter frenetic spending might be nothing more than an adjustment to our new reality. A mad rush to get the requisite "stuff". Something like buying a jacket before the winter weather. Items of necessity and luxury to ease any transition in life. Not surprisingly, COVID, was a major trasition which calls for the requisite "stuff".

Ironically, once you have "stuff" you don't need "stuff". So as we settle in to the new COVID REALITY one has to consider the shift in CONSUMER PSYCHOLOGY that will take hold. Will it be the necessity to save and prepare? Or will people party like there's no tomorrow? The numbers from the past two quarters indicate that people ran out and bought the requisite "stuff". Fortuately the early consumer spending got a big boost from stimulus checks and the federal $600-per-week unemployment compensation. While it's possible something similar will be coming down the road it will be no sooner than three months away. Until then the service sector will continued to shrink. As a continued offset the demand for ("stuff") GOODS should stay strong due to the abundance of very cheap money, but that can't last forever.

Yet there's greatest hope in the latest news: two vaccines are about to be distributed and bring an end this humanitarian and economic nightmare. Just today it was announced the first doses should be available as early as mid-December. "Front-line" healthcare workers are slated to become the first of the general public to get vaccinated. The wider public may have to wait until March for a chance to get vaccinated. If you do the math, that means we are two-thirds (2/3) into this crisis. The last third will be no picnic, but it should be obvious the "zombie apocalypse" will be avoided.

Again, going back to the current news, about 2000 people per day are dying of the disease. With 250,000 already deceased. That means an ultimate U.S. death toll around 400,000. That's hugely saddening, but not apocalyptic. The other number to consider is the 10 million unemployed. Roughly the same number as in the Great Recession. However the occupational sectors affected today are easily filled during "normal" ecoonomic activity. Consequently a V_SHAPED recovery in the service sector should be expected as the vaccine takes effect and the virus comes under control. All things considered the service sector should quickly return to "normal" by the summer of 2021.

Therefore a bright economic outlook shines just over the horizon .... lest we forget the less than orderly presidential transition. Not to mention the Chinese government divesting their U.S. treasury holdings. That could mean the end of cheap money and the end of the U.S. economy.


(c) 2020    DR-KNOW
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