What else does 2020 have up its sleeve? This week started with an ‘earthquake swarm’ in Southern CA and ended with the President and First Lady’s COVID diagnosis. What’s next??
The main economic news was Friday’s payrolls report. Nonfarm employment increased by 661,000 in September, about 200,000 shy of expectations. This disappointment was partly offset by an upward revision to July and August job growth of 145,000. Private employment expanded by 877,000, which was close to expectations, while government jobs contracted by 216,000. Some of the weakness was a statistical quirk, but the broader picture is of real trouble for state and local governments. The unemployment rate declined from 8.4% in August to 7.9% in September, as you can see below.
Overall, not bad, but not great. However, there was somewhat more encouraging news in a separate report this week – the number of job openings surged in August, as you can see below.
Hopefully this bodes well for future hiring. But this most recent surge in unemployment is different from past recessions, as we are all probably aware. If you can work from home not much has changed. But for others it has been devastating.
Hence the on-going wrangling over another relief bill. On this score the news is shaky. For example, one minute the airlines are talking about laying off more than 30K people. The next moment Speaker Pelosi is asking them to hold off. To quote CNBC:
‘House Speaker Nancy Pelosi on Friday asked airlines to hold off on tens of thousands of job cuts that started this week, vowing additional aid for the battered sector, sending shares in major U.S. carriers higher. Pelosi’s comments come a day after airlines started furloughing more than 33,000 employees after the terms of a $25 billion federal payroll support package passed in March expired. That aid, meant to help airlines cope with a plunge in bookings because of the coronavirus pandemic, prohibited job cuts until Oct. 1. Airlines have pleaded with lawmakers and the White House in recent weeks for $25 billion more to preserve jobs through March 2021 after a significant rebound in travel failed to materialize over the summer. While the proposal for more federal help won bipartisan support, talks for a national coronavirus relief package that could include the airline funding faltered this week, and airlines began their furloughs. Pelosi said the aid could be part of a standalone bill just for airline support or a broader bill.’
There is almost certainly more to come over the weekend.
Charts We Found Interesting
1. Another brutal month for rents in San Francisco. The median price of a one-bedroom last month was $2,830, a 20.3% decrease from September 2019, according to Zumper. This is the first time in many many years that the median price of a one-bedroom in San Francisco was priced below $3,000.
2. It’s really amazing how bearish people became in September. The chart below shows the positioning in NASDAQ futures contracts. Green means investors are leaning long, red means short. In a single month shorts surpassed 2008 levels.
3. Some say demographics is destiny. For example. Japan’s aging and shrinking population has played a role in that country’s relative economic stagnation. Europe is awfully close to a similar peak in population baring a massive wave of immigration. The U.S.? Not so much.
4. Do markets perform better under a Democratic or Republican administration? The chart below highlights that the much more important lesson from history is simply time in the market, not timing political cycles.
5. Heads of state/govt who’ve announced they’ve tested positive for COVID (I know Prince Charles isn’t on there, but he doesn’t do anything).
6. Another dubious record in 2020.
7. Let’s end on something totally off topic.
‘The Irish Supreme court has ruled that the bread served at Subway…cannot be defined as bread. Under Ireland’s Value-Added Tax Act of 1972 it cannot even be defined as a staple food, according to the Irish Independent, because it contains too much sugar.’
Next thing you know the Irish will be telling us that Budweiser isn’t beer. Well, they might have a point there…
Have a good weekend.
Published by Gemmer Asset Management LLC The material presented (including all charts, graphs and statistics) is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The material is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objective, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this material is suitable for their particular circumstances and, if appropriate, see professional advice, including tax advice. The price and value of investments referred to in this material and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or prices of, or income derive from, certain investments. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Gemmer Asset Management LLC (GAM). Any mutual fund performance presented in this material are used to illustrate opportunities within a diversified portfolio and do not represent the only mutual funds used in actual client portfolios. Any allocation models or statistics in this material are subject to change. GAM may change the funds utilized and/or the percentage weightings due to various circumstances. Please contact GAM, your advisor or financial representative for current inflation on allocation, account minimums and fees. Any major market indexes that are presented are unmanaged indexes or index-based mutual funds commonly used to measure the performance of the US and global stock/bond markets. These indexes have not necessarily been selected to represent an appropriate benchmark for the investment or model portfolio performance, but rather is disclosed to allow for comparison to that of well known, widely recognized indexes. The volatility of all indexes may be materially different from that of client portfolios. This material is presented for informational purposes. We maintain a list of all recommendations made in our allocation models for at least the previous 12 months. If you would like a complete listing of previous and current recommendations, please contact our office.