April 15th, 2020
The US is well into its third week of shutdown. Despite 16 million Americans currently unemployed and out of work, the stock market has gone up this past month. Just take a look at $VTSAX from March 16th through April 15th below.
Truly, markets are irrational.
One potential reason for the rise is the injection of $2.3 trillion from the Feds into various programs. Thus far, other actions from the Fed include:
- Emergency rate cuts
- Lowered amount of capital banks must have on hand
- Propped up repo markets
- Announced a credit program for businesses and consumers
- Announced a program to buy junk bonds
- Announced a program to buy bonds from states
It also appears in the past few weeks it seems overall fear has somewhat subsided for the time being. I’ll use the rates for T-Bills as a metric since people typically flock to these assets as they’re a perceived safe haven.
- March 25th, 2020: -0.04%
- April 13th, 2020: 0.16%
But, this rise in the price of stocks could be a direct response to the amount of money the Fed has injected into the market. Where else would all this newly printed money go, if not into assets?
Things don’t looks so good for Americans or the US economy in the short- to medium-term.
Outdated software making it difficult to distribute checks:
- In Colorado, tens of thousands of recently unemployed have faced severe issues with filing for unemployment due to outdated technology.
New claims for unemployment are rising at historic rates (16,780,000 unemployed) and continue to rise:
- March 21st: 3.2 million new claims filed
- March 28th: 6.86 million new claims filed
- April 4th figures: 6.6 million new claims filed
Today, 10% of Americans are unemployed. Beyond the scope off the immediate job losses for those employed in the the restaurants, bars, and service industry, more furloughs are incoming:
- City of Boulder to furlough 737 employees
- Best Buy to furlough 51,000 employees
- Disney furloughs 43,000 employees
- Media: VOX to furlough 100 employees, Guardian & Observer to furlough 100 employees
- Plus, so many more across so many verticals.
Tenants are going to be more and more strapped.
- Colorado Sun covered a study that proposed there are about 450,000 renters at risk. Many are piling up late feeds because they weren’t able to make all of April’s rent. More are facing eviction when stay at home orders lift on May 1st.
Its these types of figures that lead me to believe the “V-shaped recovery” many hope for (and that the Fed is betting on) may not happen. The longer quarantine’s remain in effect, the longer businesses will have no customers and people will have no jobs.
I hope we don’t get to a point where there’s blood in the streets.