Opening Statement from the August 2020 Intelligent Investor (part 1)
Originally published on August 5, 2020
U.S. Economy
Although the pace of job losses has declined significantly from record-highs made in April, jobs continue to be shed at record pace. As of August 2, more than 50 million jobs have been lost as a result of the hysteria surrounding the coronavirus pandemic. As COVID-19 cases have resurfaced, many states and cities have once again shut down restaurants, bars, churches and other public venues. As long as officials prevent normal economic activity, more jobs will continue to be lost. Once again this underscores the importance of developing an effective vaccine.
As a reminder, Q1 GDP growth came in at -5.0% (final revision). But we stated since March that Q2 would be the big number to watch for. Recently, Q2 GDP data were released. Not far from our estimates, Q2 GDP growth came in at a record low of -32.9 percent marked by a huge drop in consumption. The collapse in consumption was largely expected due to the shuttering of much of the service economy.
As bad as the collapse in Q2 GDP was, it was better than consensus estimates from the street of 34.9 percent. As a reminder, our upper end estimate for Q2 GDP growth from May was -35 percent. We raised our estimates to 35 percent to 45 percent in June while stating that we really had very little confidence in these estimates. Keep in mind that the data is from an early release and is thus subject to further revision in coming months.
Q3 GDP growth is certain to represent a significant improvement from Q2 data. According to the latest estimates from the Atlanta Federal Reserve, U.S. Q3 GDP is expected rebound to 11.9 percent. But this estimate is based largely on expectations of reopening the economy.
Due to resurgence in COVID-19 infections, we are now seeing closures of restaurants, bars and other establishments in key states such as California, Texas and Florida. If this trend continues it is likely to contain any rebound in growth from Q2 data. In short, based on what we see currently, we believe the estimate from the Atlanta Fed is quite optimistic.
This article continues.
To continue viewing this entry please sign in to your Client or Member account.
Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher.
These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.
Article 19 of the United Nations' Universal Declaration of Human Rights: Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.
This publication (written, audio and video) represents the commentary and/or criticisms from Mike Stathis or other individuals affiliated with Mike Stathis or AVA Investment Analytics (referred to hereafter as the “author”). Therefore, the commentary and/or criticisms only serve as an opinion and therefore should not be taken to be factual representations, regardless of what might be stated in these commentaries/criticisms. There is always a possibility that the author has made one or more unintentional errors, misspoke, misinterpreted information, and/or excluded information which might have altered the commentary and/or criticisms. Hence, you are advised to conduct your own independent investigations so that you can form your own conclusions. We encourage the public to contact us if we have made any errors in statements or assumptions. We also encourage the public to contact us if we have left out relevant information which might alter our conclusions. We cannot promise a response, but we will consider all valid information.