Animal spirits are driving momentum across the economy, especially in capital markets. There’s hundreds of billions of dollars waiting to be invested via vehicles like SPACs. Valuations are extreme, yet they are justified by low interest rates. Meanwhile demand is exceeding supply in industries like semi-conductors, housing and transport. Companies are citing inflationary pressures. But the Fed and Treasury are united behind continued stimulus. “We have the tools to deal with that risk.”
Succinct Summary: Retailers reported strong quarters last week showing that the US consumer remains resilient despite high unemployment. A new wave of Covid could slow the economy back down but vaccines are almost here. It will be interesting to see what behaviors have been permanently altered by the pandemic and which ones will return to the way that they were. Business travel is one thing that may be permanently changed.
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