The end of the holidays confirmed that this recovery will be slow and far from having a “V” shape that some (Trump in the lead) hoped for.
Although it is true that, as was said in the Last hands, the nadir of the recession has passed, the road ahead is ahead a step at a time, with eyes turned to the figures of the Covid-19.
A bit in all countries the savings rate of families it is increased a lot. Which means that Governments and Central Banks have deservedly defended the wallets emptied by the crisis, but people don't spend. In short, there is one potential question which, however, to become effective, would need greater certainties than those offered by the virus.
- slack, from crowded beaches to kids (and not only) at the disco, have pushed a second wave of infections. The outbreak is returning in Japan and South Korea, from low levels, and in the USA, from very high levels and thanks to the decrease in tests. Instead, it continues to flare sinisterly in Europe, and especially in France e Spain, with many thousands of new cases daily and a very high positivity rate.
Even in UK there is a recent acceleration (so much so that, if their parameter on the quarantine of international arrivals were applied internally, all residents would have to stay holed up at home!), but it is due to the increase in swabs, which test positive for less than '1%. The famous four “frugal” countries they have seen infections more than double in the summer, a sign that they should spend more (on virus control…). In Italy, Germany e Greece new cases, while worrying, are fewer than elsewhere.
These “Hands of the Virus” are reflected in those of the economic situation, since it is on the desire to spend - in turn directly affected by the developments of the pandemic - that aggregate demand depends. Fortunately, the “want to spend” is alive and well in the public sector.
Governments spend and spread, paradoxically incited by central banks, which know they cannot counter the shocks of the crisis alone. There FED – always aware of her “dual mandate" (low inflation and high employment) – has paved its future policies with good intentions: first, the inflation rate will go above 2% if it has been under for a long time before; and the "maximum" occupation to be pursued must be as much as possible”inclusive”, in the sense of benefiting the most disadvantaged groups. Thus it helps the achievement of global sustainability goals.
Inflation, which showed signs of awakening last month, did not confirm them and remains a dead man walking. The dynamics of producer prices it is below zero (even if a little less “below”) ei consumer prices slow down in Europe and China. The raw materials and oil, whose prices rallied last month, have not continued the momentum. In short, inflation is no longer a problem (at least in the sense of high inflation), neither for today nor for the foreseeable future.
I long rates are not much changed compared to last month. The spread of the btp it remains around 150, while the yield level, which is what counts, is around 1%. The share of Italian public debt in the hands of the market next year it will be about the same as it was pre-virus, a sign that the bulk of the additional borrowing is in the deep pockets of the central bank. A debt that will never be repaid and that will cost almost nothing. Low inflation, however, keeps i real rates, and in many cases it is weighing them down. We raise a fervent prayer: more inflation, please!
The real rates of Waist, thanks to the fall in inflation in Germany, moved above those of the T-Bond, confirming one of the reasons for the weakness of the dollar: the greenback remains between 1,18 and 1,19 against euro but will tend to go towards 1,20 and beyond; and still descends against it yuan. The Chinese currency stands at 6,83, the strongest level for a year and a half now.
There are those who think that the new Fed strategy (see above) is aimed at weakening the dollar. But, to the extent that the weakening occurs, it would be a consequence, certainly not a primum movens of the new setting. Powell was very clear about the reasons for the change in strategy and neither directly nor indirectly mentioned competitiveness.
In the financial markets there was one correction, already foreseen by Lancet. As well as stock quotes and quotations ofgold they had moved upward in unison, now they are weakening with equal commonality of purpose. Time will tell if this fix has run its course. As already mentioned in the past, i p/e ratios they are very high all over, even after this (small) retracement. In particular, for the S & P500, the p/e is at 26; but the increase in the index is concentrated in the five largest technology companies, without which (i.e. if the p/e were calculated giving equal weight to all the companies in the index) said p/e would be around 50, calculated on meager current profits.
Up to now, it must be recognized, the trend in the prices of “fabulous five” correctly anticipated future growth in their earnings. But tomorrow there is no certainty.
