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October 25, 2020

The S&P 500 (Index: SPX) continued to mostly move sideways during the third week of October 2020. Overall, it closed the trading week some 18.42 points (0.5%) lower than in the previous week, which is to say most of what happened during the week was day-to-day noise.

If investors are primarily focusing on 2020-Q4 in setting stock prices, we can expect more of the same next week. That assessment is based on coming toward the end of the redzone forecast range in this week's alternative futures chart.

Alternative Futures - S&P 500 - 2020Q3 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 23 Oct 2020

The mostly-noise driven action during the past week continues to be mostly influenced by the changing prospects of the U.S. government's next major stimulus bill. Perhaps a more serious fundamental issue is developing in Europe with its surge in coronavirus cases and corresponding lapse back into lockdown mode in several countries, which adds its own element of noise to the U.S. market. Here's a chart showing the rolling 7-day moving average trends in newly confirmed cases per 100,000 residents in both the European Union and the United States, where we find that Europe's rate of new cases is more than double than in the U.S.

European Union (EU-27) and United States: Newly Confirmed COVID-19 Cases per 100,000 Residents, Rolling 7-Day Moving Averages, 29 January 2020 - 24 October 2020

Here's a second chart showing the rolling 7-day moving average trends in newly reported deaths per 100,000 residents in the E.U. and U.S., where we see the E.U.'s COVID-19 death rate has likewise surpassed the United States.

European Union (EU-27) and United States: Newly Reported COVID-19 Deaths per 100,000 Residents, Rolling 7-Day Moving Averages, 29 January 2020 - 24 October 2020

While the U.S. is doing far better than the E.U., we expect the increasing number and relative severity of lockdowns being imposed in various EU countries will negatively affect commodity markets and prices, which will put a damper on the business outlook for U.S. firms.

Overall, the general tone of the news during the past week was mixed, with several stories referencing the U.S. economy's stronger than expected performance in recent weeks, which perhaps helps explain why stock prices mostly moved noisily sideways rather than decidedly downward.

Monday, 19 October 2020
Tuesday, 20 October 2020
Wednesday, 21 October 2020
Thursday, 22 October 2020
Friday, 23 October 2020

The Big Picture's Barry Ritholtz has outlined the positives and negatives he found in the past week's economics and markets news.

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October 23, 2020

Halloween is coming, and with it, a new problem in 2020. How can you hand out candy to your neighborhood's trick-or-treating children while keeping them far enough away to avoid the risk of catching the coronavirus from them?

A number of crafty-minded treat dispensers across America have seemingly simultaneously come up with a do-it-yourself invention to solve that problem: the COVID candy chute. All you need is some PVC pipe, some creative Halloween decorative skills, and you too can deliver candy to a costumed child from an safe distance.

It's not a new idea by any stretch, but it is one whose time would appear to have finally arrived! We came across dozens of local news clips telling essentially the same story of how an inventive parent crafted their own candy chute device, but we found the following video report from NBC-affiliate KRIS in Corpus Christi, Texas to be especially entertaining.

We could spent a lot of time unpacking everything that managed to get compressed into that two-minute long video package, but since we're focused on the invention at work here, let's simply describe it as a long tube, with one end rigged up higher than the other, designed for candy to be dropped in at the upper end and dispensed to an awaiting trick-or-treater at the lower end.

There's no patent, because its basic form is one of the oldest and simplest types of machines in existence: an inclined plane.

We'll close this edition of IIE with the words of KRIS' Corderro McMurry, who advises "If you do plan to trick or treat this Halloween, please be safe and to wear a mask." If you need guidance, here's Randall Munroe's helpful diagram revealing which Halloween masks are most effective at preventing respiratory virus transmission:


October 21, 2020

"Are you better off today than you were four years ago?"

That question first became famous when asked in 1980 by then-presidential candidate Ronald Reagan. Every four years since, polling firm Gallup has asked that question whenever a presidential election is held in the U.S.

In 2020, the year of the coronavirus pandemic and a deep recession, they received a surprising response when asking that question of registered voters:

Gallup's most recent survey found a clear majority of registered voters (56%) saying they are better off now than they were four years ago, while 32% said they are worse off.

Gallup provides a chart showing the graphical results of their polling in the fourth year of the first terms of Presidents Ronald Reagan (1984), George H.W. Bush (1992), George H.W. Bush (2004), Barack Obama (2012), and Donald Trump (2020).

Gallup (7 October 2020): Americans' Views on Whether They're Better or Worse Off Than Four Years Ago

How could that possibly be? Thanks to state and local government lockdown orders that shuttered businesses and required Americans to stay-at-home in late March 2020, the U.S. economy has been experiencing one of the sharpest, deepest recessions in its history, from which it has only begun recovering in recent months as those lockdowns have been lifted. And yet, when asked during the two week period from 14 September through 28 September 2020, a clear majority of Americans stated they and their families were better off than four years ago.

We have unique data that explains that outcome, at least as it applies to the typical American household. Median Household Income is the measure of total money income earned by the American household at the exact middle of the nation's income earning spectrum. 50% of American households have higher incomes, 50% of American households have lower incomes.

Tracking how median household income changes over time can tell us a lot about the state of the typical American household. Not only can it tell us whether nominal incomes are rising or falling with economic conditions, if we adjust it for consumer price inflation, it can tell us a lot about the buying power of the incomes Americans earn.

We've visualized that information in a single chart that shows median household income measured in both these ways.

Median Household Income in the 21st Century: Nominal and Real Modeled Estimates, January 2009 - August 2020

The chart covers the period from January 2009 through August 2020, which captures the eight years of President Obama's tenure in office and most of President Trump's. With the 2020 presidential election a race between Joe Biden, who served as Vice President during President Obama's terms in office, and Donald Trump, who is running for reelection, it seems most appropriate to focus on this period to evaluate the effect of their respective policies on the welfare of the typical American household.

We see that nominal median household income, shown as the red data series in the chart, declined from $50,608 in January 2009 to $48,559 in early 2010, which then rose at a steady rate through 2016, before accelerating after January 2017. It ultimately peaked at $66,639 in February 2020 as the U.S. economy peaked before the onset of the coronavirus recession in March 2020. Through August 2020, median household income has fallen to $65,602.

The inflation adjusted data, shown as the blue data series, tells a similar story but with meaningful differences. In terms of constant August 2020 U.S. dollars, the Obama-Biden era began with median household income at $62,299, which then fell to $57,209 in early 2011. The buying power of the median income-earning U.S. household then stayed flat until mid-2014, when it finally began recovering.

Inflation-adjusted median household income would go on to slightly surpass its January 2009 level in early 2016, and then largely stagnated for the rest of the year before peaking in December 2016 at $62,440. A few months after President Trump assumed office in January 2017, the stagnation ended and the buying power of the typical American household rose above the levels recorded throughout the Obama-Biden era. The inflation adjusted median household income ultimately peaked at $67,131 in early 2020, but has since fallen with the coronavirus recession to its current level of $65,602.

These outcomes help explain the difference in Gallup's polling results for both 2012 and 2020. For 2020, a clear majority of Americans are answering that they are better off than four years ago because they are better off, even with the negative impact of the coronavirus recession.

Speaking of which, we see indications the recessionary trend for median household income in the U.S. reached a bottom in August 2020. We anticipate September 2020's data will show the first increase in this measure since the coronavirus recession began, as the economic recovery gains traction. The data for September 2020 will become available on 30 October 2020.

Analyst's Notes

Sentier Research suspended reporting its monthly Current Population Survey-based estimates of median household income, concluding their series with data for December 2019. In its absence, we are providing monthly estimates of median household income based upon our alternate methodology. Our references and data sources are presented in the following section.


Sentier Research. Household Income Trends: January 2000 through December 2019. [Excel Spreadsheet with Nominal Median Household Incomes for January 2000 through January 2013 courtesy of Doug Short]. [PDF Document]. Accessed 6 February 2020. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars.]

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 10 September 2020. Accessed: 10 September 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 1 October 2020. Accessed: 1 October 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 1 October 2020. Accessed: 1 October 2020.

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The rate at which COVID-19 is spreading in the 27 nations of the European Union has reached nearly double the rate coronavirus infections are spreading within the United States. Here's a chart showing the sudden, runaway growth of newly confirmed COVID-19 cases in the EU compared with the US.

European Union (EU-27) and United States: Newly Confirmed COVID-19 Cases per 100,000 Residents, Rolling 7-Day Moving Average, 29 January 2020 - 18 October 2020

The EU has been experiencing true exponential growth since late July 2020. Starting from the very low level of a rolling 7-day moving average of less than one new case for every 100,000 residents, the EU is now recording over 20 new cases per 100,000 residents per day. If the United Kingdom were still included as part of the EU, the rate at which new cases are being recorded would exceed 32 cases per day per 100,000 residents, which points to how hard the UK is currently being impacted.

Officials in the EU point to the role of August travel and outbreaks in holiday destinations in generating the continent's second wave of coronavirus infections:

With new COVID-19 cases ebbing, many European nations started reopening their borders in mid-June. Travelers began to fly south for vacation like they would on any nonpandemic-ravaged year.

But outbreaks bloomed in summer holiday destinations, such as the French Riviera, Greece, and Croatia.

And then those travelers flew back to their home countries, where the outbreaks had been relatively contained.

In August, Italian officials said 30 percent of new cases were due to people who contracted the virus abroad. In Germany, officials put the figure at nearly 40 percent.

Unlike the United States, many nations in the European Union have long established national health care systems, which may have given their residents a false sense of confidence in their situation. Combined with extraordinarily strict lockdown measures that had been adopted to keep their health care systems from becoming overwhelmed earlier in 2020, that false sense of safety may have contributed to the moral hazard of engaging in social mixing while on holiday after the measures were lifted in the summer, fueling Europe's new surge in coronavirus infections.

Since one of the defining characteristics of such national health care systems is chronic underinvestment in health care technology and treatment facilities as compared to market-based systems, many of these nations are once again at risk of exceeding their health care systems' available capacity to care for infected patients unless they re-impose lockdown orders on their populations. Highly restrictive measures are already being imposed in the United Kingdom, while other European nations adopt partial lockdown measures at their national level with considerably stricter restrictions in large cities. Generally speaking, the new attempt to contain the spread of COVID infections is a repeat performance of what they did earlier in 2020.


2019 Novel Coronavirus COVID-19 (2019-nCoV) Data Repository by Johns Hopkins CSSE. Confirmed Global Time Series Data. [Online Database]. Accessed 19 October 2020.


October 19, 2020

As of the end of its 2020 fiscal year on 30 September 2020, U.S. government's total public debt outstanding stood at $27,026,921,935,432.41 ($27.027 trillion). One year earlier, it stood at $22,622,684,674,364.43 ($22.623 trillion). During the year in between, the total U.S. national debt rose by $4.404 trillion.

Earlier this year, we found the U.S. Federal Reserve had become the U.S. government's new sugar daddy. As of 30 September 2020, we find that the Federal Reserve directly holds over $4.445 trillion in U.S. Treasury securities, up $2.338 trillion from the $2.108 trillion it held a year earlier. Uncle Sam's new friendly neighborhood loan shark lent 47% of all the dollars the government borrowed during its 2020 fiscal year.

As a result, the Fed's share of all the money borrowed by the U.S. government increased from 1 out of every 8 dollars the government has borrowed to 1 out of every 6 dollars. If we just focused on the publicly-held portion of the national debt, the Fed's share would increase to 1 out of every 5 dollars borrowed.

In becoming the U.S. government's primary creditor, the Fed has widened its margin over Uncle Sam's former top lender, Social Security's Old Age and Survivors Insurance Trust Fund, which has only loaned the U.S. government 1 out every 10 dollars it has borrowed.

The following chart tallies the shares of money the U.S. government has borrowed from its major worldwide creditors. Please click here to access the full size version of the chart.

FY 2020: To Whom Does the U.S. Government Owe Money? (Preliminary Estimate)

With the Fed having taken such a dominant lender role in financing the U.S. government's spending, the relative share of money borrowed from foreign entities has decreased. That share has fallen from 30% of the total public debt outstanding in 2019 to 26% in 2020. Japan has become the largest foreign creditor to the U.S. government, as China seeks to reduce its holdings of U.S. government-issued debt.

We had to wait until the U.S. Treasury Department issued its September 2020 monthly treasury statement some four days late on 16 October 2020 to get the latest debt holdings for Social Security and other trust funds operated by the U.S. government. The data for major foreign holders of U.S. government-issued debt is preliminary (or rather, only up-to-date through August 2020) and will be subject to revision over many months ahead.


October 18, 2020

The S&P 500 (Index: SPX) stayed in its redzone lane during the past week, not having much reason to do anything but that during the week that was.

Alternative Futures - S&P 500 - 2020Q3 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 16 Oct 2020

It has been a while since we last featured the expected future for the S&P 500's quarterly dividends per share here in the S&P 500 chaos series. We've had complete futures data through the fourth quarter of 2021 since 21 September 2020, where we've created the following animated chart to show the day-to-day changes in the four weeks since. If you're accessing this article on a site that republishes our RSS news feed and you don't see the changing future, please click through to our site to access the animation.

Past and Projected Quarterly Dividends Futures for the S&P 500, 2019-Q4 through 2021-Q4, Snapshot on  16 October 2020

You may have to watch through the cycle a couple of times to fully catch it, but the biggest change has been in the more distant future quarters of 2021, where the outlook has improved in recent weeks.

We'll keep this edition short and sweet by jumping next into the more significant news headlines we pulled out of the newstream in the past week.

Monday, 12 October 2020
Tuesday, 13 October 2020
Wednesday, 14 October 2020
Thursday, 15 October 2020
Friday, 16 October 2020

Looking for more news? Barry Ritholtz lists the positives and negatives he found in the past week's economics and markets news over at The Big Picture!

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