Pre-COVID Economy Wasn’t All That Great

The stock market and economy appear to be doing ok for the moment, as the incredibly dangerous bubble inflates further. This optimism is predicated on a plethora of COVID-19 Vaccines, which are projected to bring the economy back to its pre-COVID state of health. However, the problem with this line of thinking is that 2019 was anything but normal and healthy. It was a messy combination of a Fed slashing interest rates and re-imposing QE in order to achieve a rather mundane GDP growth rate of just 2.2%. The truth is, the pre-virus economic construct was built on Silly Sand—erected on top of asset bubbles, artificial interest rates, and an avalanche of new debt issuance.

Not only will a return to “normalcy” merely bring us back to an anemic and non-viable economy, I want to highlight three things I’m watching out for during 2021 that could upend the economy and markets.

The first one is the Fiscal cliff. There are 12 million people who will lose their unemployment checks come to the end of Dec. unless D.C. manages to reach a compromise on fiscal stimulus. In addition, The CARES ACT enabled renters to defer their payments throughout most of 2020. 14 million renters will lose their forbearance measures at the end of the year.

Add to this, the 2.7 million homeowners who were granted mortgage forbearance during this year, but will have to start making payments again once the calendar turns. That means 28.7 million people will suffer from losing their unemployment assistance and/or having to pay 3/4's of a year worth of rent/mortgage payments starting in January. Americans also have $1.7 trillion in student debt. The CARES Act suspended those payments, waived the accumulation of interest, and halted collection of defaulted debt until the end of the year.

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The Fed’s coronavirus lending programs are also set to expire at the end of this year too, including the Main Street Lending Program for small- to mid-size businesses, and the Municipal Liquidity Facility, which backstops the debt market for state and local governments.

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Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called,  more

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