CNN Business/Matt Egan
The economy is screaming out for help. Washington needs to listen
The economic recovery is rapidly losing momentum, and millions of Americans are counting on Uncle Sam to come to the rescue. Yet politicians have so far failed to reach a deal on what should be a no-brainer: more fiscal relief.
Evidence is mounting that this summer’s rapid rebound is slowing as the pandemic intensifies.
Hiring is slowing. Unemployment claims remain unthinkably high. GDP is decelerating and could soon turn negative. And real-time indicators show that recoveries in restaurant reservations, air travel and hotel bookings have been derailed as Covid-19 cases, hospitalizations and deaths surge.
If no stimulus deal is reached by the end of the year, millions of Americans will lose benefits and families will slip into poverty. The inaction from Congress risks plunging the economy back into recession.
“The recovery hasn’t quite stalled out, but it’s going to be weak as we head into the first quarter,” Ethan Harris, head of global economics at Bank of America, told CNN Business.
Friday’s monthly payroll report is expected to show the United States added 469,000 jobs November, a slowdown from the 638,000 jobs added the month before. Harris warned there’s a “pretty good chance” hiring will soon turn negative — meaning the nation will once again be losing jobs on a monthly basis.
“It would be a wake-up call to Washington to get moving on a fiscal package,” said Harris. “There is no outside force intervening telling Congress to stop fooling around and get to work.”
Normally, politicians would be under fire from financial markets. But that’s not the case today as investors celebrate coronavirus vaccine breakthroughs that brighten the 2021 outlook.
The Dow just notched its best monthly performance since 1987. The S&P 500 is at record highs. The CNN Business Fear & Greed Index of market sentiment is flashing “extreme greed.”
That’s despite the fact that the daily death toll from the pandemic just hit a record of 2,804 — and some experts fear it will soon approach 4,000. A record-high 100,226 Covid-19 patients are hospitalized in the United States.
“The markets are numb to those numbers,” said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence.
Booth said that investors and Wall Street economists are squarely focused on June 2021, when vaccines could allow for a robust reopening of the economy. However, she added, “I don’t think they’re taking into account what can occur between now and then.”
Gold price to push to $2,300; silver price to surpass $30 in 2021 – Metals Focus
2020 has been a historic year for gold and silver as unprecedented stimulus measures around the world were unleashed on financial markets. And one firm is calling for higher prices next year.
In its 2021 outlook, analysts at the U.K. research firm Metals Focus said they expect gold prices to push to $2,300 an ounce next year. Meanwhile, silver prices are expected to average the year around $28.60 an ounce as it pushes to a high of $30.00.
The comments come as gold and silver have pushed off critical support levels after dismal November performances. December gold futures last traded at $1,843.50 an ounce, up 0.73% on the day; meanwhile, March silver futures last traded at $24.135 an ounce, up 23% on the day.
“Precious metals have come under significant pressure recently as investors revisit cyclical stocks after news of the vaccine started to come through,” said Neil Meader, director of gold and silver at Metals Focus in the report. “But we doubt whether this will be sustained. It will take time for the vaccine to be widely deployed. We also don’t expect there to be a return to normality until at least mid-2021.”
The analysts at Metals Focus said that the gold market will continue to benefit from further stimulus measures, low bond yields, and rising inflation pressure.
‘Low yields benefit gold from the minimal opportunity cost of holding the metal. This also limits the bond market’s ability to act as a hedge against equity price corrections,” the analysts said.
At the same time, the firm also sees potential for gold’s safe-haven allure to attract investors.
“Under the Biden Administration, the U.S.:China relationship is likely to remain challenging, while geopolitical risks still exist elsewhere. All these factors, coupled with rising inflation expectations, should continue to underpin gold investment, driving prices up by 14% to an average of $2,030 in 2021,” Neil said.
This under-the-radar policy risk could set off a tantrum in rates at the next Fed meeting
Wall Street may be underpricing a risk associated with the next Federal Reserve meeting on interest rates.
According to Richard Bernstein Advisors’ Michael Contopoulos, it may come down to President-elect Joe Biden’s pick for Treasury secretary: former Fed Chair Janet Yellen.
Contopoulos speculates the Fed could see her appointment as a dovish influence and it may overcompensate — essentially changing its typical behavior.
“What you could have is a situation where Chair [Jerome] Powell tries to get Congress to act on a large stimulus package and doesn’t necessarily sound as dovish as what the market expects,” the firm’s director of fixed income told CNBC’s “Trading Nation” on Thursday. “That’s a tail risk.”
Contopoulos, Bank of America Merrill Lynch’s former head of high yield strategy, noted it’s not his base case. But he said he believes it’s a risk investors should take seriously because the low probability event could set off a temporary tantrum in rates.
“It’s certainly something the market isn’t talking about. So, I think it’s going to be an interesting meeting,” he said. “It’s something you always want to keep your eye on.”