• Clifford Bennett, Chief Economist at ACY


• 11.10.2021 10:30 am
#stock

What Freedom Day really means for the economy.

Everyone wants to look past it, but it is what it is. There are still 5 million fewer jobs in the USA, over 3% of the workforce, than pre-Covid. Many have simply given up. If we add that 3% to the unemployment rate, we get a better idea of how well the employment situation is really going. Over 8%, is not a strong economy.

US Non-farm Payrolls and Un-employment

Market was expecting 900,000 new jobs, and got just 194,000.

We keep highlighting how market forecasts of economic data are merely 'a near to the previous number' and 'safety in the herd' approach by most institutions. No competition for commonsense, 'look out the window' economics.

NSW FREEDOM DAY.

The state partially re-opens.

A first step of hope on the path to normality.

Except, 30% of the adult population is now more excluded than ever. Still, it is a big step forward. December 1st, is actually the big day. We are likely to see a half-speed economy until then.

Please note, on a personal level, fully vaccinated people are continuing to be hospitalised in large numbers in the UK, Israel, with 88% vaccinated, and in the USA. Deaths, thankfully, are greatly reduced by 90%.

Vaccination means you are a lot safer. It does not mean you are safe. So please take personal care. Masks in crowded places remain a massive help, even if we don't like them. At last, though, the light is coming up.

The dangerous period for the economy will be in around 2-4 months time, when the efficacy of all the recent Pfizer vaccinations falls to as low as 20%, and AstraZeneca to around 45%. Though the data is less clear on AstraZeneca, than it is for Pfizer, where efficacy falls by 22% monthly. If you had Pfizer 2 months ago, your group has an efficacy level now of around 61%. Something to be mindful of when out and about.

The economy will rebound only modestly, due to far lower stimulus measures, and the long length of time in lockdown, in NSW and Victoria, having done permanent damage through business closures. Furthermore, there will be on-going risk to the economy through potential supply chain disruption due to contact isolation, wary consumer behaviour, and even for a sharp rise in hospitalisations again becoming problematic.

Economic and market forecasts of a sharp rebound are great "want to believe statements", but rather badly ignore reality. the economy will improve, but only to below trend for the foreseeable future.

NASDAQ daily

Still looks like a bear market. A very vulnerable one in fact.

AUS200 daily

Has that lofty look about it.

Disappointment at the economic and market level around what the the re-opening process actually delivers? How can I say this... is highly to inevitably likely. Still bearish in view. Emphatically.

GBPAUD daily

SterlingAussie is again of interest.

There is a good loss control level at 1.1875, generating a potentially good risk/reward opportunity to the upside on a medium term basis. We previously had a good run with this idea, and after the recent pullback, our interest is again aroused.