Weekly Market Pulse: The Crypto Distraction

 

 

Just to be clear, I am not saying that the recovery is over. There are no indications right now of renewed recession. There are some areas of the economy that are struggling with supply side issues but those will get solved in due time. But the boom everyone was expecting with the re-opening seems much less likely than it did just a couple of months ago. I have been out recently like everyone else and it is obvious that there is more public activity right now. And if you need a contractor to get anything done on your house, well good luck to you, you’re going to need it. But in the long run I continue to expect that one of the results of the pandemic will be that individuals and companies act more conservatively with their money. That may seem counterintuitive with all the speculative activity going on but for a lot of people the government handouts of the last year were like playing with house money. I would not expect people to be so cavalier with savings for which they’ve worked hard – or at all. Once things settle down, after everyone gets the vaccine euphoria out of their system, I expect a more subdued growth path. We came into the pandemic growing at 2.2%, added a lot of debt and we’ll exit with a larger government footprint on the economy. I can’t see how that translates into higher growth. 

The economic data last week was sparse and tended to confirm the peak rate of change argument. The housing market continues to struggle with starts down nearly 10% from last month. That appears to be a function of cost, particularly lumber prices. Permits did manage a rise but as a friend of mine in the construction business says, anyone can pull a permit. The Empire State and Philly Fed surveys also fell from last month’s peaks. Again, to be clear, these survey numbers are still quite high; it’s just the rate of change that has peaked. Existing home sales also fell but that is mostly a function of supply. In any case the economic impact of existing home sales is not that great.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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