Go Vote | A tour through the real economy

We take a break from our regular programming to remind everybody to go vote. This election is important, y’all know that. Just vote if you haven’t already. I don’t care who you vote for, just vote.

Another question that I have been pondering is – We know the stock market is up and to the right, but it’s not the real economy. How is the real economy doing? How bad is it – Is there another shoe to drop? As I dug into some indicators, color me pleasantly surprised.

Retail Sales are at all time highs. E-commerce is definitely on a tear

Auto Sales are at all time highs.

User car sales are at all time highs

Hmm, so it looks like the consumer is in good shape. Is this just leverage fueled? Interestingly household liabilities have not spiked. Corporate borrowing has spiked – could be related to PPP?

How about delinquencies? They seem to be fine too. Still way way lower than the 2008 peak.

What about inflation then? Consumer surveys and the market (10 year break evens and 5/5 forward rate) show an uptick in expectations. However economy is not running hot.

The unemployment rate is still pretty steep, but as the economy is re-opening the rate is falling. The spread between part time and full time unemployment has narrowed.

Things are trending back up in the dining and drink sector. Still not back to normal but getting there

What to make of this? There is no doubt that this covid caused recession has accelerated certain trends and has caused a lot of pain (unemployment) but all real economy indicators are at all time highs.With inflation indicators still low, the government and the fed are not going to be in a hurry to ease macro financial conditions. The prevailing sentiment in media and among my friends is negative. There is a bit of selection bias in the friends polling, as most of them are perms-bears :). Everybody is waiting for a crash and the future to be dim.

The quickest way for the real economy to collapse is another lock down. But methinks the lock down genie is out the bottle, it is highly unlikely that we are going back into large scale lock downs even if there is a second wave.

Real economic indicators are flashing green and sentiment is still bearish. The exact opposite conditions that indicate market mania.

Are we getting ready for another rip roaring stock market rally?

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