CNN Business/Matt Egan
Wall Street thinks a double-dip recession is more likely than V-shaped recovery
America’s stock market has swiftly recovered from the pandemic. Sophisticated investors don’t think the real economy will do the same.
Just 17% of fund managers expect a rapid V-shaped economic recovery, according to a Bank of America survey released Tuesday.
Far more (31%) anticipate a gradual U-shaped recovery. Worse, the Bank of America survey showed that 37% of fund managers expect a double-dip recession via a W-shaped recovery.
The findings are yet another reminder that the stock market is not the economy. Wall Street may have catapulted back to record highs at lightning speed, but there is no guarantee Main Street will.
The fact that the S&P 500 recovered its pandemic losses is more of a reflection of the unprecedented steps taken by central bankers than the strength of the real economy. By slashing interest rates to zero and buying trillions of dollars of bonds, the Federal Reserve has left investors with almost no choice but to bet on risky stocks.
Fox Business/Megan Henney
Nearly 40% of Americans who lost their jobs during pandemic can’t last a month on savings
More than one-third of Americans who lost their jobs during the coronavirus pandemic and related economic recession cannot last more than one month on their savings.
That’s according to a new study from SimplyWise, which found that 38% of Americans who either lost a job or had their income reduced during the crisis did not have enough money stashed away to live off of it for longer than a month.
One in five respondents said their savings would last just two weeks – an alarming statistic that comes just three weeks after the supplemental $600-a-week in unemployment benefits expired for some 30 million Americans.
The pandemic, which triggered an unprecedented shutdown of the nation’s economy, has caused the worst unemployment crisis since the Great Depression.
The Labor Department’s July jobs report released at the beginning of August showed that employers added 1.8 million jobs last month, sending the unemployment rate down to 10.2%.
While it marked the third consecutive month of job growth in the millions, the economy has so far added back less than half – about 42 percent – of the 22 million jobs it lost during the pandemic.
The lag in banks and small businesses makes Jim Cramer less optimistic about a V-shaped economic recovery
The U.S. economy has the potential to bounce back quickly from the coronavirus recession, but don’t expect a boom to happen without a bounceback in small businesses and in turn the financial sector, CNBC’s Jim Cramer said Wednesday.
“I think the economy’s going to look better six months from now, but based on the action in the market, it’s probably not going to be [great],” the “Mad Money” host said. “I’ll start believing in a V-shaped economic recovery the moment we get a V-shaped recovery in the bank stocks, but not before.”
“Until then, the only real boom will come with a vaccine,” Cramer said.
The comments came after a trading session where the major averages all retreated, Apple reached a new milestone and the Federal Reserve released notes from its July meeting.
The S&P 500, one day after the index hit its first highs since February, touched a new intraday high during the trading day, but the benchmark finished down 0.4% at 3,374.85 after the central bank delivered a bleak economic forecast. The 30-stock Dow dipped 85.19 points for a 0.3% decline to settle at 27,692.88. The tech-heavy Nasdaq Composite dropped 0.6% to 11,146.46.
“As I see it, the pandemic has caused some permanent changes in the economy, and if those changes aren’t rolled back, you might not like where we’re headed,” Cramer said.
Yahoo Finance/Bloomberg/Ranjeetha Pakiam
Gold to Gain on Massive Currency Debasement, SkyBridge Says
Gold will extend its record-setting rally on “massive currency debasement” and expectations for further stimulus, according to SkyBridge Capital, which recently added exposure to the metal after exiting in 2011.
“When you think of currency debasement the question is, what is the dollar going to weaken against, and when you look around the globe, it’s hard to be excited about alternative currencies,” said Troy Gayeski, co-chief investment officer and senior portfolio manager, listing the euro, yuan and emerging-market monies. “So, gold is obviously a natural alternative currency.”
The precious metal surged to a record well above $2,000 an ounce earlier this month — although prices have stumbled since then — as central banks including the Federal Reserve unleashed vast stimulus to support economies hurt by the coronavirus pandemic. That’s spurred bets that paper currencies will lose their value as money supply jumps. Goldman Sachs Group Inc. calls gold the currency of last resort and has forecast more gains.
Gold is “fairly rich versus oil or other real commodities, but it hasn’t appreciated nearly as much as money-supply growth since its previous peak in September of 2011,” Gayeski said in an interview. “It wouldn’t surprise us if by the end of next year, it’s around the $2,100-to-$2,200 range.”
Spot gold hit an all-time high of $2,075.47 an ounce on Aug. 7 as the dollar weakened and real interest rates fell well below zero. On Thursday it climbed 1.1% to $1,950, up almost 29% this year. Prices eased midweek after minutes from the Fed showed it edging away from a step that would underscore a commitment to an extended period of ultra-loose policy.
Ultimately, the driver for gold is “you have massive currency debasement, particularly in the U.S.,” Gayeski said.