08142020 :: Friday finance week in review
A partial digest of what we learned:
There is still no new stimulus package in play in the United States.
On August 8, 2020, Trump signed memorandums and an executive order regarding COVID-19 support measures. With that in mind,
Housing insecurity continues, as Trump's executive order, a moratorium on evictions and foreclosures, appears toothless.
Further forbearance of federal sstudent loan debt may, perhaps, be binding and functioning, but holders of said debt should check their online accounts for clues.
Regarding the lapsed unemployment compensation benefits at $600/week prior, the memorandum repurposes existing monies in the Disaster Relief Fund to provide $400/week. Note that eligibility requirements have changed. “Essentially, the Disaster Relief Memorandum relies on redirecting previously appropriated funds from general disaster relief to provide lost wage assistance to individuals in the form of an up to $400-per-week unemployment compensation supplement, to be provided for so long as the Disaster Relief Fund contains at least $25 billion in funds or until December 6, 2020, whichever occurs first.”¹
As for the lost wages assistance and cost sharing arrangement with states proposed, governors have urged Congress to pick up where they left off, as the stimulus business must actually be done there. In essence, they feel they cannot shoulder more.
With respect to the memorandum on deferring payroll taxes, it is important to note that they are not forgiven, making them due at some point until legislation (or something else) changes that.
Yields have climbed sharply. Tepid demand for longer-dated treasuries indicates supply is beginning to outstrip demand, though the 10Y auction was solid. If investors are moving toward the sovereign debt of other nations, as some reports have indicated, yields will have to rise to remain competitive. What’s more, there could be a worsening trust issue.
Gold plummeted, only to bounce back some and flatten out. It remains off its $2k+ high of last week. The next major wave is likely down, and that may have been telegraphed this week. Of course, what we saw could be a head fake and, following consolidation, the yellow metal could continue to surprise to the upside. For how long is the real question, though; a world that has navigated the irrational and resumed the maintenace of any kind of status quo, however new, is a world that is not supportive of high gold prices. That stated, hedgefunder Ray Dalio’s Bridgewater Associates increased its position in gold in Q2.
Inflation, creeping up, was on people's minds in a major way this week. It is always a monetary phenomenon, where too much money chases too few goods, as is often said. Scarcity is another way of putting this. There has been less supply than demand throughout the economy at present, especially as stimulus money was doled out and broken supply chains in effect struggled to keep goods on shelves and services active.
Banking remains a tough business to be in, with Italy’s banks upping their loss provisions.
Eurostat confirmed record drops in Eurozone employment and GDP for the most recent quarter. Meanwhile, the EU is trying to overcome trade disputes with the United States.
Nations, from Chile to possibly China, saw their central banks move towards quantitative easing through the acquisition of their own countries’ sovereign debt.
Footnotes
¹ Meier, Alex and Jacobs, Marc R. “What President Trump’s Executive Order Means for Unemployment Compensation Benefits.” Seyfarth (2020).