28 July 2020

1) Economist are warning that the economy needs help now to avoid faltering. As the President and Congress struggle to create another economic aid package, evidence is growing that the U.S. economy is headed for trouble, especially if the government doesn’t take steps to support hiring and economic growth. Experts say the economy is in a pretty fragile state again and needs another shot in the arm. Unemployment is still at a high 11.1% and hiring seems to be slowing in July, so the economy is likely to weaken further. Few economist consider that the recovery will be a V-shaped path, that is, the sharp recession will be followed by a quick rebound. In addition to helping the millions of unemployed Americans, the governments needs to help businesses from going bust.

2) There are five trends which indicate the U.S. economy is not rebounding as hope. The first is ‘Direction Requests’ on smart phones for walking and driving directions, have gone flat over the last few weeks indicating people are staying at home. The second is ‘Restaurant Bookings’ which show a 60% drop from last year. Third trend is ‘Hotel Occupancy’ which has stagnated with occupancy at 47%. ‘Air Travel’ was slowly increasing, but has also stagnated this last month with air travel down 70% from last year. Finally, ‘Home Purchases’ is increasing at a slow rate, a reflection of peoples uncertainty and changing employment status of potential buyers.

3) Price of gold continues to climb, as investors seek the safety of the yellow metal amidst economic fears of the future. Gold has historically been a refuge for money in times of economic uncertainty, a panic investment. Bullion has climbed to a record high of $1,946 per ounce. The real interest rates (less inflation) is driving investors to gold, as well as the tumbling dollar. Silver bullion is also increasing in price as another safe heaven for investing.

4) Stock market closings for – 27 JUL 20:

Dow 26,584.77 up 114.88
Nasdaq 10,536.27 up 173.09
S&P 500 3,239.41 up 23.78

10 Year Yield: up at 0.61%

Oil: up at $41.66

19 May 2020

1) The managing director Kristalina Georgieva of the IMF (International Monetary Fund) says the Fund is likely to revise downward its forecast of a 3% contraction of the GDP (Gross Domestic Product) for 2020. In turn, this will most likely cause a revision of the IMF’s forecast for a partial recovery of 5.8% in 2021. This means a longer time for a full economic recovery from the virus crisis. The IMF had forecasted that the business closures to slow the virus would throw the world into the deepest recession since the 1930’s Great Depression.

2) Gold markets have risen to their highest in more than seven years, a result of the Federal Reserve saying stocks and asset prices could suffer a significant decline as a result of the coronavirus crisis. The economic recovery could go to the end of 2021, depending on the arrival of an effective vaccine. Owning gold is considered to be a safe haven in times of economic turmoil, able to retain its value when other assets are sinking in value. Other precious metals such as silver, platinum and palladium are also experiencing a swing upward in price, but since these are commodities, their value may drop in a slower economy and reduced industrial demand.

3) The price of oil is above $30 a barrel for the first time in two months as U.S. and other country producers continue to cut production in order to restore the balance of the oil market. The world wide shut downs from the virus has drastically reduced the demand for oil world wide, with the world’s storage capacity quickly filling to maximum capacity, and for a time, producers having to pay to have their oil production removed. While the price of oil is still too low to salvage the shale oil (fracking) business in America, it still bodes well for the U.S. and world economies. Nevertheless, expectations are it will be well into the next year for the oil markets to be fully restored. Oil futures contracts that are due in June, show few signs of a resulting plunge in oil prices as when the May contracts came due and investors had to pay others to take their oil away.

4) Stock market closings for – 18 MAY 20:

Dow 24,597.37 up 911.95
Nasdaq 9,234.83 up 220.27
S&P 500 2,953.91 up 90.21

10 Year Yield: up at 0.74%

Oil: up at $32.21

17 September 2019

1) The drone attacks on two Saudi oil refineries has caused a jump in world oil prices. The strikes wiped out half of Saudi Arabia’s output capacity leading to fears of de-stabilization of the world’s crude producing region and therefore to the world’s economy. Prices for oil leaped with the opening of markets on Monday, the biggest jump in prices ever. President Trump claims that Iran was behind the attacks and that a coalition should be formed to counter the threat of Iran. The strike was made using 10 drones with the disruption surpassing the Kuwaiti invasion by Saddam Hussein in 1990.

2) UAW (United Auto Workers) workers at GM (General Motors) have gone on strike which has shut down the automakers highly profitable U.S. operations. Lost production is expected to cost GM $40 to $50 million dollars a day. There are a number of issues which GM and union officials said must be resolved before a new contract can be signed. The UAW wants to block the closing of plants engaged in manufacturing of sedans, which the company and other manufactures are discontinuing as the market goes to SUVs and crossover automobiles.

3) Gold and silver prices have surged from the global turmoil of Saudi oil attacks. Gold and silver are the traditional safe haven for investors in times of uncertainty. This gives further impetus to lower the interest rates by a quarter point to counter a slide into a recession.

4) Stock market closings for – 16 SEP 19:

Dow            27,076.82    down    142.70
Nasdaq        8,153.54    down      23.17
S&P 500       2,997.96    down        9.43

10 Year Yield:    down   at    1.84%

Oil:    down   at    $61.90