Deflated Inflation, Record-High Corporate Debt, and Near-Zero Rates Are Here to Stay
June 12, 2020 | FIRESIDE CHARTS
U.S. CPI fell for the third straight month to near-zero in May and Core CPI didn’t fare much better. According to the OECD, inflation in advanced countries is likely to remain low through much of 2021. Corporate debt has reached a record high in the U.S., approaching 50% of GDP and leaving many companies just barely clinging to life as they see debt servicing costs eclipse profits. Near-zero interest rates may help avoid making the debt problem worse at least, and they’ve also been busy pushing mortgage applications to a near record high. And it appears they’re here to stay… at least through 2022, according to Fed Chairman Jerome Powell. It appears the Fed isn’t holding its breath for that v-shaped recovery we were all hoping for. The economic threat from COVID-19 is far from over, as highlighted by yesterday’s market slump on the back of headlines about a second wave. But were those stories founded? Hotspots remain—Texas has seen a streak of record-high COVID-19 hospitalizations—but U.S. numbers overall are still trending downward. Let’s hope that trend continues as reopenings march on.
1. As the full CPI nears zero, the core CPI is also declining:
Source: WSJ Daily Shot, from 6/11/20
2. Is the rise of corporate debt creating a systemic risk to our banks?
Source: WSJ Daily Shot, from 6/12/20
3. Certainly Covid is not helping…
Source: WSJ Daily Shot, from 6/12/20
4. City or large building living situations under Covid (combined with low interest rates) have induced many to move to their own homes. Mortgage applications hit a new record high:
Source: WSJ Daily Shot, from 6/11/20
5. Fed Chair Powell stated that rates would remain low through 2022. The Fed will also keep the QE stimulus at the current pace. Here is the new policy statement with the edits from the last statement
Source: WSJ Daily Shot, from 6/11/20
6. Yes, U.S. cases topped 2 million, but this headline/report does not appear to be supported by the data…yet. Certain States like California and Texas are surging, but many others in the Northeast have seen Covid come under control…so far.
Source: Bloomberg News, from 6/11/20
7. Here are the new daily confirmed cases in the U.S. according to JHU CSSE:
Source: JHU CSSE, as of 6/11/20
8. This is what a second wave looks like (Iran):
Source: JHU CSSE, as of 6/11/20
9. On top of SpaceX, based on its current stock prices trajectory, Tesla is about to become the most valuable auto maker in the world…
Source: WSJ Daily Shot, from 6/11/20
10. This pretty much sums it up…
Source: WSJ Daily Shot, from 6/11/20
11. It is time to live up to our uniquely American ideals and stop prejudice and injustice for all…
Source: WSJ Daily Shot, from 6/11/20
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be helf in client accounts.