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.

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.

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.

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

• Signs and portents for the U.S. economy:
• Oil dips after OPEC+ meeting as Libyan supply boost weighs
• Worried about weak oil demand, OPEC pledges action
• Trump's payments to farmers hit all-time high ahead of election
• Fed minions learning to love higher inflation, chief Fed minion learning to love digital currencies:
• Fed's Harker: Tolerating higher inflation 'worth it' to help achieve employment goals
• Fed's Clarida says rates will stay near zero until inflation reaches 2%
• Fed's Clarida says U.S. economic recovery has a 'long way to go'
• Fed's Powell: More important for U.S. to get digital currency right than be first
• Bigger trouble developing in Brazil:
• Brazil GDP to shrink 4% this year, economy at 'inflection point': officials
• China shows signs of recovery:
• China's economic recovery quickens as consumption returns
• China September industrial output rises 6.9% year-on-year; retail sales up 3.3%
• Instant View: China's economic recovery quickens in third quarter but misses forecasts
• Chief ECM minion wants more stimulus, lower level minions wants no more, another sends up red flag on data quality, and yet another wants big bank mergers:
• Lagarde says ECB to maintain accommodative policy in response to coronavirus crisis
• ECB's Holzmann sees no need for more stimulus now
• ECB's Mersch warns against double counting as decision looms
• ECB's De Guindos says mergers can improve banks' profitability
• Wall Street closes lower as stimulus deadline nears without deal

Tuesday, 20 October 2020

• Signs and portents for the U.S. economy:
• Oil up on U.S. stimulus hopes, rising virus cases keep prices in check
• U.S. single-family homebuilding, permits surge to more than 13-year high
• Trump pushes for major COVID-19 deal over Senate Republican objections
• U.S. coronavirus aid talks moving closer to deal-Pelosi aide
• Fed minions optimistic, pessimistic, worried about non-banks, but still believe they are all powerful:
• Fed's Evans sees less economic drag from new COVID-19 wave
• Fed's Evans says recovery could stall without more fiscal stimulus
• Fed's Quarles says pandemic stresses highlighted fragility in nonbanks
• NY Fed's Singh says central bank can ramp up, slow down, corporate bond purchases as needed
• Bigger trouble developing in Japan, Britain, Latin America:
• Exclusive: Bank of Japan to cut growth, inflation forecasts as pandemic pain persists - sources
• Britain's economic recovery faltering, Bank of England to step up spending: Reuters poll
• Latin America's recovery in doubt as fiscal worries mount, confidence wanes: Reuters poll
• Wall Street shares end higher on stimulus optimism

Wednesday, 21 October 2020

• Signs and portents for the U.S. economy:
• Oil prices fall as inventory report reflects demand weakness
• U.S. economy recovering slowly, but some sectors struggling: Fed survey
• Analysis: China and U.S. economies diverge over coronavirus response
• Where's the floor? Investors left guessing as U.S., Europe money market rates sink
• Fed minions pessimistic, uncertain, and want more U.S. government spending:
• Fed's Kaplan says U.S. economy will live with virus well into next year
• Fed's Mester says further study needed of monetary policy's affect on financial stability
• Fed's Brainard calls for more fiscal aid for economy
• Bigger trouble developing in Japan, Britain, Latin America:
• IMF cuts Asia's growth forecast, warns of pandemic-driven risks
• China shows signs of recovery:
• China's fiscal revenues rise 4.7% in third-quarter as economy gains steam
• China to balance stable growth and risk prevention: central bank
• China's 2020 auto production and sales could return to 2019 levels: government official
• Chief ECB minion goes on listening tour ahead of monetary policy revamp:
• Lagarde turns to civil society in ECB transformation effort
• S&P edges down in choppy session as U.S. stimulus talks drag on

Thursday, 22 October 2020

• Daily signs and portents for stronger than expected U.S. economy:
• Oil ends higher, boosted by U.S. stimulus hopes
• U.S. weekly jobless claims fall; many unemployed losing benefits
• U.S. existing home sales blow past expectations in September
• U.S. economy's rebound sets up test of Fed's new pledge
• Wall Street closes higher, trade choppy as U.S. stimulus talks eyed

Friday, 23 October 2020

• Daily signs and portents for the U.S. economy:
• Oil falls about 2% on Libyan output, COVID-19 demand concerns
• Exclusive: China eyes more corn imports as shipments surge, set to become top buyer
• Trump, Mnuchin say Pelosi must compromise to reach COVID-19 deal
• Fed minions worry about liquidity, think coronavirus has legs:
• Threats to U.S. Treasury market liquidity still exist, Fed says
• Fed's Kaplan says U.S. economy will live with virus well into next year
• Bigger trouble developing in the Eurozone:
• Euro zone economy at risk of double-dip recession: PMIs
• German factories hum, services shrink in two-speed economy: PMI
• Japan seeing signs of recovery:
• Japan September factory output to rise for fourth straight month: Reuters poll
• S&P, Nasdaq close higher as stimulus talks in spotlight

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

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:

"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).

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.

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.

References

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.

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.

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.

References

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

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.

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.

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.

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

• Signs and portents for the U.S. economy:
• Oil prices fall 3% as U.S., Libyan, Norwegian supplies resume
• Bigger trouble developing in UK, France, China, Japan:
• Explainer: What is England's new COVID-19 lockdown system?
• Number of COVID patients in French intensive care units highest in nearly five months
• China's premier says 'arduous efforts' needed to achieve economic goals: state media
• Japan September wholesale prices slump, heightening deflation risk
• Bigger stimulus developing in Japan, EU using stimulus to force fiscal union:
• Kuroda says BOJ ready to ease more, has tools to cushion pandemic pain
• EU moving towards fiscal union with pandemic recovery plan: German FinMin
• ECB minions worry over stalling Eurozone economy, not certain copying Fed's new inflation targeting is a good policy:
• Euro zone economy losing momentum, ECB's de Guindos says
• Exclusive: ECB policymakers wary of following Fed's route on inflation target, sources say
• Apple and Amazon drive rally on Wall Street
• Nasdaq Whale Sparks Mega-Tech Stocks' Best Day In 6 Months

Tuesday, 13 October 2020

• Signs and portents for the U.S. economy:
• Oil rises nearly 2% as robust China trade data offsets returning supply
• McConnell sets Senate vote on coronavirus aid, Pelosi spurns White House bid
• U.S. small business confidence at highest since February
• Used vehicles lift U.S. consumer prices, but inflation slowing
• EU dishing out trade tariffs on U.S., China:
• EU wins tariff clearance on $4 billion of U.S. imports in Boeing case
• EU imposes tariffs on aluminium products from China
• Bigger stimulus to be doled out in Eurozone, signs of stimulus getting traction in China:
• How and when will EU countries get their recovery money?
• China auto sales jump in 'Golden September' as shoppers return to showrooms
• ECB minion thinks new COVID wave won't completely shut down EU economies again:
• Economic damage of new corona wave likely to be less dramatic: ECB's Knot
• Wall Street closes lower on vaccine delay, dampened stimulus hopes

Wednesday, 14 October 2020

• Signs and portents for the U.S. economy:
• Oil rises 2% as OPEC complies with production cuts
• Mnuchin says coronavirus relief deal unlikely before U.S. election
• Fed minion holds huge contradictions within own head, another wants U.S. government to spend more:
• Fed's Clarida says U.S. data 'surprisingly strong,' but deep hole remains
• Clarida: 'Pent up demand' for services a potential 'tailwind' when pandemic eases
• Fed's Daly says U.S. economy needs more fiscal support: CNBC
• Bigger stimulus being developed for third world, economic growth guaranteed in China:
• World Bank to propose $25 billion in extra funding for poorest countries
• China's third quarter GDP growth expected to improve: PBOC official
• ECB minions have some things to think over, Bank of Canada minions think they should get into digital currency:
• ECB policymakers set out wish list for strategic rethink
• ECB should look at broadening out its monetary analysis: Villeroy
• ECB's Mersch unconvinced of need for new strategy
• New virus containment measures would require more ECB stimulus, Holzmann says
• Pandemic accelerates need to consider digital currency: Bank of Canada
• Wall Street ends down after Mnuchin dims stimulus hopes

Thursday, 15 October 2020

• Signs and portents for the U.S. economy:
• Oil eases as new lockdowns raise concern about fuel demand
• OPEC+ will ensure oil prices do not plunge again, says OPEC chief
• Trump calls for big COVID-19 stimulus but McConnell disagrees
• Trump threatens to 'strike back' if EU imposes tariffs over Boeing
• Exclusive: U.S. offers tariff truce if Airbus repays billions in aid, sources say
• Fed minions say more needs to be done for jobs, look to fiscal over monetary stimulus:
• Fed's Barkin says hiring could recover slowly as companies streamline
• Fed's Kaplan says disadvantaged Americans need help getting back to work
• Fed's Daly: Monetary policy is in a good place, more fiscal help needed
• Bigger trouble developing in Canada, Central America:
• Canada sheds jobs for seventh straight month in September: ADP
• Central Americans edge north as pandemic spurs economic collapse
• Bigger stimulus to be doled out in Eurozone:
• EU parliament chief asks leaders for more money to unlock EU recovery package
• EU to use bond auctions to sell debt for 800-billion-euro recovery fund
• ECB minion thinks new COVID wave won't completely shut EU economies down again:
• Euro zone banks can absorb losses from crisis: Lagarde
• S&P 500 ends lower as investors eye stimulus impasse

Friday, 16 October 2020

• Daily signs and portents for the U.S. economy:
• Oil dips on COVID-19 resurgence, fears of more supply
• U.S. retail sales beat expectations; outlook murky
• U.S. manufacturing production unexpectedly drops in September
• Fed minions want more fiscal stimulus, think their monetary stimulus is fine, but still worry about economy:
• Fed's Kashkari: Recovery will be grinding and slow without more stimulus
• Current Fed bond purchases 'appropriate': St. Louis Fed's Bullard
• NY Fed's Williams says challenging period ahead for some sectors of economy
• Bigger stimulus developing in France, Japan:
• France plans $23 billion state-backed scheme to avert company failures
• BOJ has many tools to ramp up stimulus: deputy governor Wakatabe
• Dovish ECB minions don't want to stop stimulus:
• ECB's Villeroy says mistake to set end date now for pandemic response
• ECB's Visco says important for policies to remain accommodating
• Dow advances, S&P ekes out gain as vaccine timeline comes into focus

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!