by Gary Alexander

June 23, 2020

I wrote about our Savings Glut before, but now we’re seeing the beginning of the Great Savings Release. Due to store closings while most of us were still working, plus up to $10 trillion in stimulus from the  Federal Reserve and Congress, we’re overflowing with savings. The personal savings rate skyrocketed from 8.2% in February to a record 33% in April as the national piggy bank bloated from a lean $1.4 trillion in February to a Porky $6.1 trillion in April. That money was frozen in April, since stores were closed and the IRS said, “Please don’t send us money on April 15. Please delay your taxes until July 15.”

Personal Savings Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Sad to say, some vulnerable Americans are in bad financial shape due to suddenly losing their jobs, and not receiving their unemployment or stimulus checks in a timely manner; but in the aggregate, we have become a nation swimming in cash. Millions of households are sitting on a pile of cash, which has helped fuel a “V-shaped” (50%) stock market recovery. This cash could now fuel a similar but slower-motion V-shaped economic recovery in the second half of 2020, if we elect to spend more of our mattress money.

Economist Ed Yardeni has doubled as a psychiatrist lately by saying, “When American consumers are happy, we spend money,” but “when we are depressed, we spend even more money, because shopping releases dopamine in our brains, which makes us feel good.” Psychologically, he says, “After almost three months of cabin fever, we all need a dopamine rush. Now that we are allowed to leave our cabins, we are rushing to buy goods that couldn’t be ordered online and delivered to our front door.”

Exhibit #1 in the Great Savings Release was the record rise of online shopping in April. In fact, online shopping was the only bright spot in the April retail report, since department stores were locked up all across America. April’s online sales rose to a record $883 billion for the month (a $10 trillion annual rate), accounting for the majority (a record 50.7%) of all General merchandise, Apparel and accessories, Furniture, and Other (GAFO) sales, which is what we generally call “department store” type of sales.

Retail Sales Online Shopping Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

As an older person living on a remote island, I can tell you that 80% of my shopping is online, since I don’t care for donning face masks and wandering malls, since shopping from my computer gives more choice and a “double dopamine” rush – the thrill of clicking the sale, and the delivery van two days later.

Ordering online is the greatest cure for cabin fever. Many firms now allow 7-day “free trials” for clothes!

Exhibit #2 in the Great Savings Release is the May Retail Sales Report, reflecting partial store openings, by rising 17.7% over April’s lockdown lows. Here are some of the leaders in May’s categories of sales:

Retail Sale Category Gains Table

In the aggregate, May sales didn’t reach February’s peak, but they repaired most of the damage:

Retail Sales Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Good news: We’re not going into a Depression. Economists at Goldman Sachs estimate that consumer spending now stands at 90% of the pre-pandemic level, up from 74% at the mid-April bottom. Goldman economists also say that manufacturing exports stabilized in May after slumping in March and April. Jan Hatzius, Chief Economist at Goldman Sachs, expects “unprecedented’ growth in the second half of 2020 and economists at the Federal Reserve expect the 2021 growth rate to reach 5%, the best rate since 1984.

Old Folks, Stay Home – All Others May Resume Work, School & Shopping

I’ll turn 75 next month. I normally speak and moderate panels at Freedom Fest in mid-July, but I think I’ll skip that conference this year – for the first time. I just don’t like the hassle of handling face masks (they mess with my hearing aids and glasses!), and social distancing gets problematic with popular speakers.

I have a modest solution. Why don’t those of us over 70 voluntarily quarantine ourselves at home (except for careful trips for essential services) until a vaccine is discovered? We’ll have to learn ZOOM or Skype to talk to grandchildren, but we can do it. Those under 60 can work, shop, go to school, and play sports.

According to a Wall Street Journal editorial (“The Covid Age Penalty,” June 12), “About 80% of Americans who have died of Covid-19 are older than 65, and the median age is 80,” and the same is true in Europe: “A review by Stanford medical professor John Ioannidis last month found that individuals under age 65 accounted for 4.8% to 9.3% of all Covid-19 deaths in 10 European countries.”

Comparing the risk of Covid-19 death to something we do daily, the death risk for most people under the age of 65 isn’t much higher than getting in a fatal car accident as you drive to work. For those under 65 in California and Florida, the risk of dying from Covid-19 is equal to driving 16 or 17 miles per day. (Granted, Covid-19 exposure is 35 to 40 times riskier in New Jersey and New York, respectively.)

The risk is much larger for those over age 80 and especially 85. According to the Foundation for Research on Equal Opportunity, “Americans over 85 are about 2.75 times more likely to die from Covid-19 than those 75 to 84, seven times more likely than those 65 to 74 and 16.8 times more than those 55 to 64.”

Covid-19 and Flu Deaths Bar Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The left chart (above) shows that well over 60% of Covid-19 fatalities in the U.S. are for those over age 75, and most of those come from nursing homes, for patients with pre-existing health challenges. The number of those under 45 dying from Covid-19 is small and shrinking, now about 2%. The second chart shows the rising death rate by age, just 0.2% for those under 40, then rapidly rising for those over 70.

Life is filled with risks. Staying at home and losing your livelihood is a risk, too. Suicides and addiction rates are rising. Recent looting and vandalism may be one result of pent-up frustration from joblessness among poor and lower middle-class youth suddenly thrown out of work and seemingly without hope. These are mostly young people. There has not been a widespread outbreak of new Covid-19 cases among these protestors who began marching in close proximity, with no masks, four weeks ago. Let them work! Give them back their jobs – an income, a reason to get up each day, and contribute to society positively.

The pessimists predicted 25% or greater unemployment, eclipsing the Great Depression, but they didn’t factor in the strength of the underlying economy, or the expansive Fed, unlike the 1930s, or the resilience of American business managers and their employees. Covid-19 is still a threat, but the U.S. economy is adapting. If we open up smart and right, we could see a jobless rate under 10% by the end of the year.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

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About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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