5-Chart Friday (9/18/20)

By Charlie Bilello

18 Sep 2020

5 charts from the past week that tell an interesting story in markets and investing…

1) Snowflakes and Bubbles

Snowflake ($SNOW) went public this week as the largest software IPO ever.

On its first day of trading it reached a market cap high of over $88 billion, trading at an astounding 219x sales.

In a mania there seems to be no limit to the price investors will pay for a good story (“the cloud”).

2) Groundhog Day Fed

There was a time long ago when FOMC meetings actually had some surprises. Not anymore.

The Fed met again this week and was predictable as ever…

Powell and the Fed want much higher inflation, and they made it abundantly clear that the Fed will remain “highly accommodative” long after it is necessary.

At the end of 2018, the Fed was projecting a 3.13% Fed Funds Rate by 2021. Last year, they moved that down to 1.625%. At their meeting this week, they forecasted a 0% Fed Funds rate in 2021, 2022, and 2023. The market (Fed Funds Futures) agrees.

3) Housing Boom 2.0

Homebuilders have never been more optimistic than they are today.

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The combination of free money from the government and record low mortgage rates has created a surge in demand for new homes like never before.

“In August, first-time homebuyer activity rose 19 percent from July to the highest monthly level ever for Freddie Mac.”

4) The Almighty Consumer

Speaking of free money, Americans continued to spend it in August, with Retail Sales hitting another new high.

Of note, however, was the declining pace of growth (+0.2% real in August vs. 0.3% in July and +7.9% in June). On that point, while talk of a second stimulus bill (with more free money) continues, there is still a divide on the total amount of the bill. While both parties want to give out more free money, Democrats are calling for a much higher overall number.

What happens to the economy if a bill with more free money is not passed? We may soon find out…


5) Second Wave in Europe

Covid-19 continues to prove difficult to keep down for long, with the second wave in Europe continuing to grow.

The good news thus far is that (like the US) new cases in this second wave have skewed to a younger, healthier population, meaning much fewer deaths. It is important to remember, however, that the lag time between cases and deaths has increased considerably (as it takes more time before it is spread from healthy population to a more vulnerable population).


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And that’s it for this week. Thanks for reading.

Have a great weekend everyone!


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