Feb 10, 2021

Axios Markets

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Join Axios Minneapolis reporters Nick Halter and Torey Van Oot today at 12:30pm ET for a Smart Take event on Black-owned businesses and the future of the economy in Minneapolis, featuring Sen. Amy Klobuchar.

🐉 Trivia: Known as the Sea Dragon, this national hero of Brazil was a fisherman who united dockworkers in a strike against slave trading between states that led to the end of slavery in the country.

1 big thing: Inequality rises again

Reproduced from Federal Reserve Bank of New York; Chart: Axios Visuals

Inequality in the U.S. continues to grow as the economy undergoes a compositional change in the labor market.

  • While higher wage earners have largely recouped their losses from the coronavirus pandemic's shutdowns earlier this year, those at the bottom of the income spectrum remain out of work at high levels and are losing more ground.

Why it matters: Wealth and income inequality, which have been shown to cause major political and economic disruptions for countries, had been at a record high in the U.S. before the pandemic.

  • The response to the pandemic made it more extreme and new data show it worsened further at the end of 2020.

What happened: The winter surge of COVID-19 stopped and then reversed the progress in returning to work that had been made by the lowest-income workers, the New York Fed points out in a research paper released Tuesday.

  • But it had limited impact on high- and middle-income workers, further boosting the employment gap between the groups.

Why it happened: "Due to a combination of government restrictions and behavioral changes people made to avoid exposure to the virus, the largest losses during the pandemic accrued to the leisure and hospitality industry—most notably, restaurants, bars, and hotels—as well as retail, both of which tend to employ large numbers of lower-paid workers," researchers wrote.

The big picture: According to data from the Social Security Administration, 45% of all U.S. workers in 2019 were included in the category of the lowest-income workers, earning less than $30,000 a year.

Between the lines: The pandemic caused "outsized job losses for women, minorities, and younger workers as the pandemic took hold," research shows, and the response of policymakers only exacerbated the divide.

  • A separate report from the New York Fed concluded that the actions taken by the Federal Reserve in response to the pandemic did little to reduce unemployment inequality but did notably increase wealth inequality.

Watch this space: A similar phenomenon is happening for businesses.

  • The latest optimism survey from the National Federation of Independent Business found small business confidence at an eight-month low with the number expecting business conditions to improve over the next six months falling to its lowest since 2013.
  • In contrast, the latest economic outlook index from the Business Roundtable, made up of CEOs from some of the largest U.S. companies, jumped 22.2 points from its Q3 level and was 5 points above its historical average. Expectations for improved sales jumped 29.9 points.
2. Catch up quick

Backed by Amazon and Ford, electric vehicle startup Rivian Automotive is looking to list its shares via IPO as soon as September at a valuation of at least $50 billion, unnamed sources said. (Bloomberg)

The NYSE, Nasdaq and Cboe each filed suits asking the U.S. Court of Appeals to block an SEC approved plan to overhaul the public data feeds that broadcast stock prices to investors. (WSJ)

3. Nasdaq 14,000!
Data: FactSet; Chart: Axios Visuals

The Nasdaq rose to a record closing high above 14,000 on Tuesday, as equities continued to march higher.

  • In fact, all three major U.S. stock indexes closed at record highs on Monday, even though the Dow and S&P 500 ended the day slightly lower than where they opened.

By the numbers: The Nasdaq is up 8.7% year to date, having risen by more than 7% so far in February. The index has closed in the green every day this month with the lone exception of Feb. 3 when it fell 0.02%.

4. Less saving, less spending, more stock buying

Reproduced from the Conference Board; Chart: Axios Visuals

Americans are putting more of their money into the stock market and putting less of it into savings accounts. They're also spending less on things like housing or basic goods and services, a new survey from the Conference Board finds.

What's happening: The survey shows a decrease in spending by consumers on all categories, with the exception of home improvements and decorating from the second quarter to the fourth quarter.

  • No data were available for the third quarter.

Between the lines: The survey also found that spending on housing costs fell to a record low of 18% in Q4, down 3.5 percentage points from Q2, thanks largely to "plummeting rental rates in city centers, rent abatements and cuts, temporary rent and mortgage non-payments, and historically low mortgage rates."

  • Along with housing savings, total spending on essential goods and services, such as food and beverage at home, routine transportation, education and medical fell 4.1 percentage points in Q4 compared to Q2.
  • Consumers shifted their money largely to discretionary products like electronics and apparel. and of course the stock market.

The big picture: The Conference Board's U.S. Consumer Dynamics Report found that "pandemic-related forces—including more time at home, reduced opportunities to spend, and enhanced fiscal support from the government—continue to be the chief factors shaping consumer behavior in the United States."

Keep it 💯: "The booms and busts of a few unlikely ‘meme stocks’ have grabbed recent headlines, but the rise of individual investors tells a broader story about spending habits during COVID-19," said Denise Dahlhoff, senior researcher at the Conference Board.

  • "Trends like low interest rates and declining debt concerns—alongside below-normal spending on vacations and out-of-home entertainment due to pandemic restrictions—have left a portion of Americans with more disposable income and fewer ways to spend it. Stocks, which continue to yield strong returns, have become an increasingly attractive option for these consumers."
5. Call him Colin SPACernick

Axios' Dan Primack writes: Former NFL quarterback Colin Kaepernick on Tuesday disclosed that he has formed a blank-check company that will seek to raise $250 million in an IPO.

Why it matters: Kaepernick hasn't played pro football since 2016, but has remained a cultural lightning rod — either loved or loathed for his social activism, including his strong support of the Black Lives Matters movement.

Details: The SPAC is called Mission Advancement Corp., and designed to acquire a company at "the intersection of consumer and impact."

  • Kaepernick is the SPAC's co-chair and co-sponsor and is working in partnership with venture capital firm the Najafi Companies.
  • Directors include Attica Jaques, Google's head of global brand marketing, and Katia Beauchamp, co-founder and CEO of Birchbox.
6. Interest in crypto remains low but is growing fast

Reproduced from CivicScience; Chart: Axios Visuals

Use of and interest in cryptocurrency remains far from mainstream but it's growing at a sizable clip. Companies like PayPal, Square and most recently Tesla are helping by launching crypto payment programs.

Driving the news: A new survey from data firm CivicScience provided first to Axios shows that since the third quarter of 2019 the number of people investing in cryptocurrencies has risen by 50% — to 9% from 6% — and the number of people who intend to use crypto has more than doubled, rising to 7% from 3%.

  • CivicScience's data also show that while the percentage of respondents who say they are not interested in crypto has remained the same, the percentage who say they have never heard of it has dropped from 21% in 2019 to 18% as of the end of January.

One level deeper: The survey found that 6% of respondents say they are likely to purchase cryptocurrency through PayPal, with past experience in crypto investment largely dictating interest.

  • Those who have previously invested in cryptocurrency are the most likely to purchase it through PayPal (26%).
  • Those who intend to invest in cryptocurrency are only slightly less likely to say they will purchase through PayPal (25%).
  • Most who have never invested (including those unaware of cryptocurrency) are unlikely to purchase crypto through PayPal (98%).

Thanks for reading!

Trivia: Known as the Sea Dragon, this national hero of Brazil was a fisherman who united dockworkers in a strike against slave trading between states that led to the end of slavery in the country.

Answer: Francisco José do Nascimento. To learn how a student at the University of Florida found his tomb hundreds of years later, check out this piece from NPR.

Hat tip to Axios race and justice reporter Russell Contreras for suggesting today's trivia subject.