Market Snapshot September 11, 2020
Good Friday AM,
Today is a somber day. 19 years ago, thousands of people who woke up expecting to have a normal day at work lost their lives. The rest of us fortunate to have survived will be forever impacted. It is one of those events which time slows down and you can remember each moment as it happened. Our hearts and prayers remain with those lost along with their families and friends. Hug those you love just a little longer and a little tighter today (and all days).
See-saw week for sure. Stocks up for the moment today and Bonds are having a hard time catching a break. Today CPI was not our friend. The market was looking for .02 and we got double that number. CPI measures inflation and inflation is kryptonite to bonds. When the stronger CPI number was released, bonds shriveled. Love this quote from Dan Rawitch: “The Stock market is again all over the board, we may see a repeat of yesterday as the Robin Hoodies try to bid the market up, but the institutions continue to SELL into each rally these little guys serve them up.” If there is a selloff in stocks, it will help bonds today. With today’s move, bonds have slipped below support which does make me a little nervous. We need to regain some footing here or risk falling further. I would think this is a good time to lock whatever is not yet locked.
Stimulus Bill extending unemployment claims, etc. (unemployment claims being the biggest part of the bill) is on hold yet again as Senators could not come to an agreement and are now leaving Washington for the weekend. I don’t know how anything is accomplished in Washington with such polarization.
While we are all excited about the speed of the recovery (so far), here is a little sobering thought as well.
Source: American Bankruptcy Institute (ABI)
The onset of the COVID-19 pandemic, and subsequent business closures that occurred in the months following, resulted in a rapid rise in commercial Chapter 11 bankruptcies, as some businesses were not able to reopen – or reopen at sufficient capacity to survive.
There were 528 bankruptcy filings in February 2020, and an additional increase of over 200 filings to 725 in May. The year to date total in 2020 is about 28 percent higher than the same period in 2019. Even as states reopen, many businesses have been restricted in their scale of operations, especially at dining and entertainment venues.
While this week’s MBA Chart of the Week shows months of similar or even higher spikes in recent years, these new 2020 bankruptcy filings come at a time where the public health picture is far from clear, the unemployment rate is elevated, and there has been an increasing trend in the number of permanent layoffs. The unemployment rate averaged around 4 percent between 2017 and 2019, compared to a high of 14.7 percent in April 2020, and 8.4 percent in August. From 2017 to 2019, the average number of permanent job losses per month dropped from 1.8 million to 1.3 million. Starting in March 2020, there were increases in five out of six months, including a 534,000 increase in August to reach 3.4 million for the month. The economic hit the U.S. experienced was severe and concentrated in a few sectors of the economy. Looking ahead, the economy will require not only time to rebuild, but also adaptations to operations in a post-pandemic environment.
While there have been numerous data points showing encouraging signs of an economic recovery from the dramatic and steep downturn we experienced in the second quarter, the rate and the extent of this recovery, and the health of household finances, will hinge on the rehiring of the workers who have lost their jobs, both permanently and temporarily. Much of this rehiring will greatly depend on if – and when – surviving businesses can hire them. Moreover, the health of the business sector will certainly impact demand for both retail and office space, therefore these trends bear close watching for both MBA’s residential and commercial/multifamily members.
Please remain safe and healthy, enjoy the weekend and first, make today great!