The economy is booming and everyone should enjoy it. The American economy is benefitting from tremendous amounts of pent-up demand and in some of the hardest-hit industries’ activity is beginning to tick back up above 2019 levels. Along with that boom, there are clear signs of inflation and concerns about overheating. Even Janet Yellen seemed concerned for a few hours last week.
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.”
The Year in Review: 2020 was an unprecedented year and The Transcript covered the economy throughout all of its twists and turns. Even though China was battling Covid in 2019, no one really knew what was in store for all of us in 2020. Technology, capital markets, and housing were three industries that boomed. While the stimulus was integral, the economic hero of 2020 was the US consumer. Optimism is high that 2021 will be a more normal year.
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Succinct Summary: The Great Recession of ’08 pales in comparison to the kind of recession that we have here. The UK just recorded the worst quarterly recession on record. The virus levels remain stubbornly high in many places. The hope comes from the modest recovery in some hard-hit industries.
Editor’s Request: This weekly newsletter is made possible by donations from our readers. If you like what you are reading, click here to donate (Our suggested donation: $10 per month). Help us keep The Transcript going.
Succinct Summary: Companies are reporting signs of improvement in the economy. But the rebound is coming off such a low base that these numbers would still be considered very bad in any other environment. The duration of this rebound will depend heavily on whether or not there’s a second wave of infections. Still, even without the virus it probably will take the economy a long time to recover from such a severe shock.
On an industry basis: private capital markets are searching for price levels; consumers are dreaming of the future; tech is chugging along; and the industrial/energy economy is feeling immense pain.
Editor’s Request: This weekly newsletter is made possible by donations from our readers. If you like what you are reading, click here to donate (Our suggested donation: $10 per month). Help us keep The Transcript going.