Connect with us

Government

Can The Stock Market’s ‘V’ Recovery Survive Economic Collapse?

Can The Stock Market’s ‘V’ Recovery Survive Economic Collapse?

Published

4 years ago

on

Sentiment in the US equity market continues to look on the bright side. Despite dismal economic numbers, which are set to become even grimmer, the collective wisdom of investors appears to be betting on a strong rebound in the near future.

The S&P 500 Index recently suffered its steepest, quickest drawdown in the post-war era, but the benchmark has since bounced back dramatically. After suffering a 33.9% drawdown on March 23, just weeks after setting a record high in February, the S&P 500 has recovered about half that loss. Compared with the top-10 drawdowns since 1950, that’s an impressive record… so far.

The question is whether the market’s ‘V’ recovery will persist? No one knows, of course. But to be an optimist on this front one has to think positively in the extreme, namely: that Mr. Market will be able to look through the mind-numbing economic data that’s yet to come.

The deluge continues with this week’s employment numbers for April. Today’s ADP Employment Report for last month is expected to show an incredible loss of 20 million jobs, based on Econoday.com’s consensus point forecast. If correct, the loss will reverse a decade of growth in the labor market.

The carnage will almost certainly continue in the government’s payrolls estimate for April that arrives this Friday — a report that’s widely expected to deliver similarly dark news.

The optimistic spin is that because the recession was self-inflicted – a means to fight the spread of coronavirus – the recovery will arrive quickly once the all-clear signal arrives. The so-called ‘V’ recovery for the economy, in other words, will follow the forward-looking stock market’s ‘V’ bounce.

That’s close to the best-case scenario and it’s what everyone is hoping for. But the reality is probably more complicated. “Growth rates are confusing,” says Bart van Ark, global chief economist at The Conference Board. “Of course we’ll get a recovery. If one store opens that will be a recovery. That doesn’t mean we’ll be anywhere close to where we were.”

The main challenge for anticipating the strength, extent and timing of the economic rebound: countless variables that will unfold in the weeks and months, and unfold in a way that’s interdependent with a high level of uncertainty. There’s no useful precedent for what’s going on and so modeling the future is a black hole of doubt.

Indeed, there are several paths for the economic recovery, as the Brookings Institution advises. The possibilities range from the ‘Z’ rebound – a sharp rebound that briefly lifts the economy above the previous trend path — to the worst-case scenario: the dreaded ‘L’ recovery, where the economic blowback leaves a permanent loss.  

There are several intermediate paths between those two extremes and it’s reasonable to assume that some middle way is likely if not necessarily fate. That doesn’t rule out a ‘V’ or even a ‘Z’ bounce, but for now it’s hard to have a high degree of confidence that the stock market’s near-best-case outlook is the most likely path.

Learn To Use R For Portfolio Analysis
Quantitative Investment Portfolio Analytics In R:
An Introduction To R For Modeling Portfolio Risk and Return
By James Picerno

“At the beginning of the pandemic, few understood how long it would be before life returned to normal, and many analysts talked of V-shaped recoveries,” advise the Brookings’ researchers.  “Many analysts now believe that, barring major improvements in COVID treatment (which would make the disease less dangerous), only a vaccine can allow economic activity to return to the pre-pandemic baseline.”

Even once the economy starts to reopen, measures will likely be put in place that curtail economic activity to some degree—travel will be less common, businesses will have to space workers and customers further apart, restaurants will be serving fewer customers at a time, and sporting events, concerts, and other activities involving large crowds probably will remain off limits for a long time. And even if the rules allow, many people may be reluctant to return to life as it was before the pandemic.

So, there will likely be no quick recovery. A key question is whether damage to the economy’s capacity to produce goods and services will be long lasting.

In terms of policy decisions, politics will (unfortunately) play a role. That’s a significant wild card in election year.

Dr. Anthony Fauci, the White House’s top coronavirus task force adviser, summarized the high-stakes political challenge. “It’s the balance of something that’s a very difficult choice,” he  said earlier this week on CNN. “How many deaths and how much suffering are you willing to accept to get back to what you want to be, some form of normality, sooner rather than later?”

No one person or government department can offer a definitive, enduring answer at one point in time. Rather, the answer will evolve over months, as the collective wisdom of the government, the voters, health officials and other groups and institutions weigh in.

In short, it’s going to take time to figure out what’s possible, politically and economically, and what’s not. The stock market seems to think otherwise, which is to say that the rebound in shares reflects a relatively upbeat forecast – a forecast that may or may not be accurate.  

How is recession risk evolving? Monitor the outlook with a subscription to:
The US Business Cycle Risk Report

Read More

Related Topics:
Continue Reading

Government

Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

9 hours ago

on

March 9, 2024

By

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

Read More

Continue Reading

Government

Walmart joins Costco in sharing key pricing news

The massive retailers have both shared information that some retailers keep very close to the vest.

Published

11 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

Read More

Continue Reading

Government

Walmart has really good news for shoppers (and Joe Biden)

The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.

Published

12 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

Read More

Continue Reading

Trending