Finance and Markets Newsletter

For the week ending: October 24, 2020

THE ECONOMY

Writing about the U. S. economy seems especially challenging these days. The reasons include: (1) the virus pandemic, (2) possible government stimulus programs, and (3) the upcoming presidential elections. Let’s take a closer look at each of these:

· Virus – unfortunately, the pandemic is growing in most states and is predicted to worsen in the coming months. That’s primarily due to colder weather, which will drive more activities indoors and make social distancing more difficult. Analysts have noted the strong relationship between virus infections and unemployment. There’s a month or two lag, but more infections will make hiring more difficult. Job growth will almost certainly slow down in the next couple of months. Last week’s initial jobless claims were 787,000. That was down from the previous month, but it’s still alarmingly high.

· Stimulus programs – Washington seems gridlocked on any further aid as the White House and the Congress continue to battle over whether to “go big” or to pass a “skinny” bill that would impact a narrow slice of the economy such as the airlines. It’s pretty clear that the House wants to keep talking past November 3. I expect some form of aid to be passed soon after the election, but cash won’t likely reach consumers’ pockets until sometime in the spring of 2021.

· Elections – the Presidential election is scheduled for November 3, but it seems more and more likely that we won’t know the final outcome for days or even weeks afterward. Part of the uncertainty may lie in the makeup of the Supreme Court, which is where the outcome of the election may be decided.

Until the election results are finalized, we’ll be seeing a blitz of political ads from both parties aimed at gaining votes from the remaining undecided. As I write this Newsletter, more than fifty-two million voters have already made up their minds and cast their ballots.

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