November 09, 2021
☀️ Good morning! And welcome to another day of markets news.
📞 Poll of the day: Americans are pretty much "over" the Delta variant ... so says the latest installment of the Axios/Ipsos Coronavirus Index.
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⏱ Today's word count is 1,043, a 4-minute read.
1 big thing: The economy is great, but voters don't believe it
Economic pessimism is on the rise — despite the fact that the actual economy is doing exceptionally well, Axios' Felix Salmon and Hans Nichols write.
Why it matters: The big question facing the White House between now and next year's elections is whether it will be able to use America's real-world economic health to boost President Biden's economic approval ratings.
What they're saying: A White House official says that some of the economic pessimism comes from supply chain issues, which are contributing to the soaring price of cars and other goods.
- While the Biden administration is trying to seize on positive economic indicators to demonstrate signs of strength in the economy, the broad population doesn't yet seem to be convinced.
By the numbers: Economic strength is undeniable, both in the country overall and at the household level. The economy is expected to grow 5.7% this year.
- Almost 6 million jobs were created just between January and October; the unemployment rate is now just 4.6%. The quit rate, the standard barometer of workers' optimism, hit an all-time record high of 2.9% in August.
- Average earnings are up 3.5% this year and 4.9% annually, to $31 per hour.
- Checking accounts are 50% fatter than they were pre-pandemic, while the bottom 50% of the population now has more than $3 trillion in household wealth — up 32% just in the first half of this year, and up 55% from before the pandemic.
- Stocks hit a new record high every day last week (and yesterday, too), and are up more than 30% year to date.
Yes, but: 56% of voters think the country is on the wrong track, up from 39% in June, per the Harris Poll; 57% think the economy is weak, up from 43% in June.
- The Gallup economic confidence index is now at -25, down from positive territory in June.
Inflation, both reported and actual, is a central concern. The most salient price in the economy — the gas price — is up 62% over the past year, to $3.42 per gallon, and the most recent inflation rate, set to be released tomorrow, is expected to come in at an eye-popping 5.8% year on year.
- Cable news has been talking about inflation much more frequently, with a particular spike at Fox News.
- Once you start looking for inflation, you see it everywhere. And it's very hard for individuals to quantify from their own experience.
The bottom line: Biden doesn't need to worry about the economy. He does, however, need to worry about what Americans think of the economy.
2. Catch up quick
General Electric announced this morning it will split into three separate companies — focused on aviation, health care and energy — by 2024. (CNBC.com)
Randal Quarles, who was the Federal Reserve's vice chair for bank supervision, submitted his resignation on Monday and will step down from his post at the end of December, giving Biden an avenue with which to shape the Fed. (Axios)
Robinhood Markets said it experienced a security breach in which an intruder obtained the email addresses of about 5 million people — but no bank account or Social Security numbers were exposed. (Robinhood)
3. Alphabet's $2 trillion moment
Alphabet's market capitalization surpassed $2 trillion briefly on Monday morning, Axios' Sara Fischer writes.
- The feat, which only two other U.S. companies (Apple and Microsoft) have accomplished, comes just a year and a half after Alphabet first crossed the $1 trillion threshold.
Why it matters: The Google parent company's business has been buoyed by the pandemic-era migration of companies to digital operations in the past two years.
Yes, but: Market cap is a metric that's built around market sentiment, not business fundamentals, which means it's vulnerable to big swings.
The big picture: Amazon, which is currently valued at roughly $1.7 trillion, was racing Google to become the third $2 trillion company.
- Facebook hit the $1 trillion mark earlier this year.
- Tesla surpassed $1 trillion in value for the first time last month following an alleged deal to sell 100,000 vehicles to Hertz.
4. A dose of optimism from JPMorgan
With 2021 soon in the rearview, the economic tumult of 2020 is looking more and more like a faded “scar,” J.P. Morgan Asset Management's team told reporters on Monday, Axios' Hope King writes.
Why it matters: “Bold” and coordinated fiscal and monetary policies not only helped soften the pandemic’s blow — they also set up conditions for more corporate and economic growth, they said.
The big picture: The passage of the $1.2 trillion infrastructure bill on Friday is a further example of the U.S. government's willingness to spend in order to drive economic activity, said David Kelly, the firm's chief global strategist.
- That, along with strong corporate profits and low-interest rates, points to strong capital spending in the U.S. over the next 10 to 15 years, he said.
Yes, but: Global growth will likely moderate compared to the last decade, as expansion in China — the world's second-largest economy — slows down.
The bottom line: “[T]he growth outlook is pretty good, all things considered — and certainly, it does not look like the global economy has been in any way permanently scarred by the pandemic,” Kelly said.
5. Charted: Travel bump ✈️
For airlines, one of the biggest remaining pieces of the recovery puzzle just fell into place — the ban that had killed most international travel lifted on Monday.
State of play: Stocks backing the U.S. airlines that most actively serve international markets — American, Delta and United — have surged by 13%-16% since President Biden signed the order on Oct. 25.
- They're approaching the highs reached back in May and June, before the spread of the Delta variant chilled travel — and reopening trades.
What’s happening: American Airlines said that bookings for flights between Europe and the U.S. were 40% higher in the days after the October announcement than they had been the week before, the New York Times reports.
- Delta Air Lines CEO Ed Bastian told CNBC last month that as soon as the White House signaled it would open up travel in November, “immediately we saw a tenfold increase in bookings, almost overnight,” for international flights.
On the flip side: Pandemic-era stay-at-home winners like Peloton and Zoom — and their stocks — are signaling the boom times may be behind them, as Axios' Courtenay Brown reports.
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