Consumer Confidence Surveys – As Of March 31, 2020

Advisor Perspectives had a post of March 31, 2020 (“Consumer Confidence ‘Declined Sharply in March’“) that displays the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

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There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, the continued subdued absolute levels of these two surveys was disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2624.98 as this post is written

The “CARES” Act (“Coronavirus Aid, Relief, and Economic Security Act”)

On Friday, President Trump signed into law H.R. 748, the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act.

The Act authorizes over $2 Trillion to be spent. As stated in a March 27, 2020 Statement By The President:

The Act makes emergency supplemental appropriations and other changes to law to help the Nation respond to the coronavirus outbreak.

There are a broad array of questions that can – and should be – asked with regard to this stimulus bill. Many of the questions are similar in nature to those that I have discussed with regard to stimulus measures taken during and after the Financial Crisis. Of note, there is broad anticipation that additional large stimulus measures will be taken, especially if the broad-based economic weakness that is occurring – and will continue to occur – persists.

Two excerpts from President Trump’s March 27, 2020 comments regarding the “CARES” Act, as seen in the WhiteHouse.gov release titled “Remarks by President Trump at Signing of H.R.748, The CARES Act“:

THE PRESIDENT:  Well, thank you all very much.  This is a very important day.  I’ll sign the single-biggest economic relief package in American history and, I must say, or any other package, by the way.  It’s twice as large as any relief ever signed.  It’s $2.2 billion, but it actually goes up to 6.2 — potentially — billion dollars — trillion dollars.  So you’re talking about 6.2 trillion-dollar bill.  Nothing like that.  And this will deliver urgently needed relief to our nation’s families, workers, and businesses.  And that’s what this is all about.

also:

This legislation provides for direct payments to individuals and unprecedented support to small businesses.  We’re going to keep our small businesses strong and our big businesses strong.  And that’s keeping our country strong and our jobs strong.

This historic bill includes the following:

• $300 billion in direct cash payments will be available to every American citizen earning less than $99,000 per year; $3,400 for a typical family of four.  So a family of four: $3,400.
• And then $350 billion in job retention loans for small businesses, with loan forgiveness available for businesses that continue paying their workers.  The workers get paid.
• Approximately $250 billion in expanded unemployment benefits.  The average worker who has lost his or her job will receive 100 percent of their salary for up to four full months.

So, things like this have never happened in our country.

• $500 billion in support for hard-hit industries, with a ban on corporate stock buybacks — we don’t let them buy back the stock; we don’t let that happen — and tough limits on executive compensation.
• Over $100 billion to support our heroic doctors, nurses, and hospitals.  And you see what’s happening.  And I want to thank, while we’re here, also the incredible job that’s done by the Army Corps of Engineers and by FEMA.  It’s been incredible.  They did four hospitals in two days or three days, in New York.  And they’re, like, incredible structures.  What a job they’ve been doing.  And they’re doing them all over the country.
• $45 billion for the Disaster Relief Fund, supporting our state, local, and tribal leaders.
• $27 billion for the development of vaccines, therapies, and other public health response efforts, including $16 billion to build up the Strategic National Stockpile with critical stockpiles.  And I’m going to — we have tremendous supplies coming into the stockpile, and you’ll be seeing that and hearing about it in a little bit because we’re doing a news conference at 5:30 on what’s happening.

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Additional details regarding the allocations of this “CARES” Act can be seen in a variety of media sources, including the Committee for a Responsible Federal Budget (CRFB) March 25, 2020 post titled “What’s in the $2 Trillion Coronavirus Relief Package?“

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2584.97 as this post is written 

Corporate Profits As A Percentage Of GDP

In the last post (“4th Quarter 2019 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the fourth quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 26, 2020

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2560.72 as this post is written

4th Quarter 2019 Corporate Profits

Today’s (March 26, 2020) GDP release (Q4 2019, third estimate) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (preliminary estimate) for the 4th Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated March 26, 2020, with a value of $1903.753 Billion SAAR):

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Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed March 26, 2020; https://research.stlouisfed.org/fred2/series/CP

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2557.05 as this post is written

Four Charts Of Recent S&P500 Price Volatility – March 26, 2020

This post is an update to past posts regarding stock market volatility.

While I track many different measures of volatility, I find the following charts to be both simple and clear in depicting the recent volatility in the stock market.

Overall, my analyses indicates that there are many reasons for this volatility, and the volatility is highly significant.

First, a one-year daily depiction of the S&P500 through Wednesday’s (March 25, 2020) close, with a 50-day moving average (MA50) depicted by the blue line:

(click on chart to enlarge image)(charts courtesy of StockCharts.com)

Second, a three-month daily depiction of the S&P500 through Wednesday’s (March 25, 2020) close, with a 50-day moving average (MA50) depicted by the blue line:

Third, a three-month depiction of the S&P500 in 60-minute intervals through Wednesday’s (March 25, 2020) close, with a 50-hour moving average (MA50) depicted by the blue line:

Fourth, a one-month depiction of the S&P500 in 10-minute intervals through Wednesday’s (March 25, 2020) close, with a 50-period moving average (MA50) depicted by the blue line:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2475.56 as this post is written

Durable Goods New Orders – Long-Term Charts Through February 2020

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through February 2020, updated on March 25, 2020. This value is $249,409 ($ Millions):

(click on charts to enlarge images)

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Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis, with a last value of -.1%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed March 25, 2020;
http://research.stlouisfed.org/fred2/series/DGORDER

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2475.56 as this post is written

Money Supply Charts Through February 2020

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the MZM (Money Zero Maturity), defined in FRED as the following:

M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.

Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on March 19, 2020 depicting data through February 2020, with a value of $17,220.4 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 9.0%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 24, 2020;
https://research.stlouisfed.org/fred2/series/MZMSL

The second set shows M2, defined in FRED as the following:

M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on March 19, 2020, depicting data through February 2020, with a value of $15,535.7 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 7.4%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 24, 2020;
https://research.stlouisfed.org/fred2/series/M2SL

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2381.68 as this post is written

Additional Notable Federal Reserve Actions To Address Weakness

On Friday (March 20, 2020) I wrote a post (“Federal Reserve Actions To Address Financial And Economic Weakness“) detailing recently announced Federal Reserve actions intended to address various problematical conditions. These conditions include actual and expected substantial economic weakness, financial instability, and various rapidly falling asset prices.

In that post I also highlighted my thoughts on intervention efforts. I have written extensively about interventions of all types, including Quantitative Easing (QE) and past economic stimulus programs. Posts discussing intervention measures can generally be found in the “Interventions” label.

Early today (March 23, 2020) the Federal Reserve made additional announcements. Among those announcements was one regarding the amount of QE it will possibly do, as well as other newly enacted intervention programs.

The new announcement with regard to QE is discussed in this March 23 FOMC Statement. An excerpt:

The Federal Open Market Committee is taking further actions to support the flow of credit to households and businesses by addressing strains in the markets for Treasury securities and agency mortgage-backed securities. The Federal Reserve will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions. The Committee will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will continue to closely monitor market conditions, and will assess the appropriate pace of its securities purchases at future meetings.

The paramount phrase is that the stated asset purchases will be done “in the amounts needed.” Most observers appear to interpret this as (potentially) “unlimited QE.”

For reference, a schedule of past and planned Treasury purchases can be seen in the table below, from the Federal Reserve Bank of New York’s “Treasury Securities Operational Details” page:

Also, the planned MBS purchases, of $50B each day this week, are discussed in the March 23, 2020 “Statement Regarding Treasury Securities and Agency Mortgage-Backed Securities Operations” release.

As well, a separate announcement, titled “Federal Reserve announces extensive new measures to support the economy” lists other newly-announced programs. An excerpt (further explanation and details are seen in the press release):

• Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
• Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
• Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
• Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
• Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2270.23 as this post is written

Updates Of Economic Indicators March 2020

The following is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The March 2020 Chicago Fed National Activity Index (CFNAI) updated as of March 23, 2020:

The CFNAI, with current reading of .16:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, March 23, 2020;
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with current reading of -.21:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, March 23, 2020;
https://fred.stlouisfed.org/series/CFNAIMA3

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The ECRI WLI (Weekly Leading Index):

As of March 20, 2020 (incorporating data through March 13, 2020) the WLI was at 136.1 and the WLI, Gr. was at -4.4%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of March 20, 2020:

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The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Below is the latest chart, depicting the ADS Index from December 31, 2007 through March 14, 2020:

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The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the March 19, 2020 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased Slightly in February” the LEI was at 112.1, the CEI was at 107.6, and the LAG was 109.1 in February.

An excerpt from the release:

“The U.S. LEI rose slightly in February, but it doesn’t reflect the impact of the COVID-19 pandemic which began to hit the U.S. economy in full by early March. The slight gain in February came only from half of the LEI components. In particular, the recovery in manufacturing, which looked promising until February, will now be short-lived because of the disruption in global supply chains and falling demand,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Declines in stock prices, consumers’ outlook on economic conditions, manufacturing new orders, average workweek in manufacturing, and rising unemployment claims will begin to negatively impact the economy. As a result, the economy may already be entering into a period of contraction.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of March 19, 2020:

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2304.92 as this post is written