Billions Of Stimulus Dollars In Quarantine

The renewed Civil Rights movement triggered by last week's shocking murder of an African American over a tortuous 8 minutes and 46 seconds may be the tragic change-agent straw that will leave an indelible mark upon our society. Hopefully, the unified record response to the Covid-19 pandemic will be exceeded with fervor in actions to finally address racially connected social and economic injustice staining America’s position among first world countries. Thus far, the stock market appears agnostic, lacking fear of further economic impairment from this explosive issue or the pandemic. A major financial buffer calming the investment outlook has been several Trillion in Government replacement dollars that have sharply boosted income and savings to combat a calamitous collapse in personal consumption. While welfare efforts are replacing most of, if not more than, the average income of lower-wage earners, creating the kinetic energy of potential demand, the ability to spend while isolating at home is limited near term. A Savings rate under 10% is normal. With a record 33% of income less expenses being quarantined in savings and stock accounts, it’s just a matter of time before the fear factor of public places and a more open economy allow people to increase consumption at record rates to revert back to mean activity levels.

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 There is still a long way to go, but we can see here how people are gradually lowering their walls of fear and starting to revive the critical Service Sector that comprises over 77% of our economy. Just 24% currently feel it’s safe to fly, but bookings are on the rise as the economy opens and the healthier young workers snap up bargains.

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The progress of reopening of the economy is also split by a political party. Republican-led states are opening up for business earlier, able to earn and spend without as much viral concern, in part due to lower population densities. The slow but steady improvement from all states should manifest later this summer as the virus fears fade and seasonal activity reaches its peak before Labor Day.

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