Global Macro Monitor

We are not taking a victory lap yet but we have been warning President Trump’s focus on the stock market was not only bad economics but also a losing political proposition.  Next Tuesday the option expires.

But the juxtaposition of a weak economy with high asset prices that result from low interest rates could provoke public anger, especially if it coincides with unemployment concentrated among poorly paid service-sector workers. – Economist, October 8, 2020

We will get a record-shattering 30 percent plus Q3 GDP release tomorrow but don’t forget the downside-upside asymmetry.  If the economy falls 50 percent, it takes a 100 percent increase to get back to even.

Bad Look

We wrote about the above quote from the Economist way back in our May post, Bad Look Of High Stock Prices & High Unemployment.

The elites, or let’s say the Top 10 percent of households, for example, own 88 percent of stock market wealth.  See our post,  Why The Stock Bull Is A Big Meh For Most Americans.

And a stock market clinging close to its highs with an unemployment rate that has nearly tripled will reopen the wounds of the Great Financial Crisis (GFC) that the “fat cats” were once again bailed out at the expense of Main Street.

…Moreover, a narrative is beginning to take shape that the Trump administration and his Republicans are more of a Trojan Horse for the 1 percent and Greenwich set.  That is, tax cuts for the wealthy and large corporations while cutting social services and healthcare for the middle class and pumping up and bailing out stocks at the expense of Main Street, where the top 10 percent directly hold almost 90 percent of total stock wealth while the bottom 90 percent have only a little over 10 percent.

At the same time, the Trump administration presents itself as sort of a dysfunctional Honey Boo Boo reality show to entertain its base.  Though what some may perceive as a nice circus act but not quite exactly the savior of the working and middle class that many voted for. – GMM, May 2020

401(K)s

We hear a lot these days the term “Trojan Horse” applied to the current administration.  You did hear that here first, by the way.

Trump’s focus on the stock market was misplaced.   He talks about how everyone’s 401k skyrocketing.  Really?

In 2019, the average 401(k) account balance was $92,148, according to Vanguard data.

Each year, the investment company analyzes account data from 5 million retirement accounts. Across these accounts, the typical account balance varies widely by the method used to calculate it — while the average 401(k) savings balance is over $90,000, the median account balance is much less at $22,217, according to Vanguard’s latest data, which was calculated in 2019. – Business Insider

Most people just don’t have much direct exposure to equities even if they have had their 401(K)s maxed out in the FANG stocks.  Moreover,  the median 401k could barely pay a half year’s rent in any decent size city in the United States.

Not Feeling It

The bottom line is most people haven’t and don’t feel the stock bull market, if, that is, we are still in a bull market.  The S&P peaked on September 2nd at 3588.11 and is off almost 8.9 percent from the high.

Our post in December, Why The Stock Bull Is A Big Meh For Most Americans, drives this point home.

We will end by paraphrasing one market clown and say this with absolute certainty,

“next week will be a Terrible Tuesday somewhere and for someone.”