by Gary Alexander

July 7, 2020

The IMF now expects China to grow by a net +1% this year – the only global economy to grow this year, according to their latest (June) projections. Total real (after inflation) world output is expected to decline by almost 5% (-4.9%) this year, with the U.S. declining a staggering -8.0%, Mexico -10.5%, the Eurozone -10.2%, and Eurozone laggards (and leading Covid victims) Spain and Italy falling by -12.8% in GDP.

China also leads in current output with the only set of Purchasing Managers’ Indexes (PMIs) above 50 (signaling expansion) in June. Their Caixin Services PMI hit a 10-year high of 58.4 in June, up from 55 in May, while their manufacturing PMI rose to 51.2, a six-month post-Covid high for them.

In the stock market sweepstakes, China is also #1. Every nation lost ground in the first half, but China was first to emerge from their shutdowns, so the Shanghai Composite “only” lost 2.1% in the first half, according to the Wall Street Journal (July 1).  The S&P 500 came in #2 at -4.0%, even though the Nasdaq composite gained a frothy 12.1%. (The rules of this contest, however, allow only one index per nation.)

First-Half Market Sweepstakes Table

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

The eurozone, in general, was way down the list with a -12.7% overall decline, led by Germany’s “least bad” -7.1% decline and France trailing at -17.4%, with outsider England doing even worse at -18.2%.

Commodities fared far worse, with the Thomson Reuters CRB Index down -25.74% in the first half, due mostly to a -35.69% decline in crude oil. The sole big winner was GOLD, up 18%+. Gold had its best quarter in four years, up 13.2%, while its cheaper cousin silver, rose a hefty 31.5% in the second quarter.

The U.S. economy can recover if we can open up businesses on a more consistent basis. Americans have tons of cash sitting on the sidelines, itching to get back into the game, as I have shown in recent columns.

From the end of February through the week of June 15, the total of savings deposits plus retail money market funds rose by $1.6 trillion to a record $12.6 trillion. Over this same period, total U.S. monetary aggregates soared by $3.8 trillion for MZM (money with zero maturity), and by $2.8 trillion for M2.

The annualized rates of money growth are a phenomenal 36.4% for M1, 30% for MZM, and 24% for M2.

Money with Zero Maturity (MZM) and M2 Chart

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

The last few months of lockdown hindered consumers from spending their regular paychecks (for the 85%+ still working) plus their government checks, but many started to pay off their credit card debt. After rising steadily for a decade, net revolving credit fell $84 billion from a record high $1.104 trillion in February to $1.02 trillion in April. If Americans don’t spend soon, expect more declines in this chart:

Consumer Credit Chart

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

Currently, some states are starting to lock down again due to a rise in Covid cases, but the rest of the world – Asia and Europe – is back at work. Death tolls are down in the U.S. even as cases are rising. As I’ve said before, the elderly and the vulnerable need to stay quarantined, but perhaps those under 60 could carefully return to school and work in the fall. A crushed economy is also a severe health and death risk.

Provisional Death Counts Chart

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

Pay No Attention to Seattle – The Mayor and Governor Certainly Don’t

You may have noticed the end last week of the short-lived (24-day) state, Capitol Hill Autonomous Zone (CHAZ), which quickly morphed into the Capital Hill Occupied Protest (CHOP). I grew up in Seattle and now live far north of that fair city, so I’m used to this nonsense. When my parents were growing up here, labor strikes were as common as rain, starting with the IWW (Wobblies) in 1919, the first 20th century “general strike” of solidarity, when unions shut down much of the nation’s steel, coal, and other industries.

On the morning of February 6, 1919, nearly all of Seattle stopped working as 25,000 union members joined 35,000 shipyard workers already on strike, as the city’s 101 AFL unions all voted to walk out.

Strike Called Newspaper Headline Image

There were similar strikes throughout the 1930s. As I grew up there in the 1950s, I noticed my grandma’s favorite newspaper was not the local Post-Intelligencer, which I delivered, but the “Daily Worker,” put out by the Communist Party USA. Thankfully, Bolshevism never caught on with my dad, his brothers, or me, but Seattle’s big story in the late 1950s was labor union leader Dave Beck. More recently, Seattle youth revolted over the 1999 World Trade Organization (WTO) meetings there, and we’ve seen May Day protests downtown almost every May 1 since 2000, often with destruction of some downtown buildings, so it was no surprise to see property destroyed in the last month and the establishment of CHAZ/CHOP.

For locals, it was also no surprise that Seattle’s Mayor called CHAZ a “summer of love” and a “block party atmosphere” for days after its forceful appropriation of private businesses and a police precinct. When asked about the CHAZ occupation, Washington governor Jay Inslee first confessed total ignorance of the situation. Later, he said it was “largely peaceful” and “fundamentally American.” On June 20, Horace Lorenzo Anderson, 19, was killed in CHOP after medical units were denied access to help take him to a hospital. Still, CHOP was allowed to exist “peacefully” within its patrolled borders until another teenager was killed and a third thrown on death’s door before city officials finally began to ask questions.

Seattle has been a hotbed of business births, from UPS and Boeing over a century ago to modern giants Amazon, Starbucks, Costco, Microsoft, Nordstrom, and more, but now the exodus may be beginning. Boeing has already moved its corporate headquarters to Chicago and Amazon has shopped its secondary headquarters recently. In last week’s Wall Street Journal, CEO Peter Rex of Rex Teams wrote an Op-Ed titled, “I’m Leaving Seattle for Texas So My Employees Can Be Free,” citing the dangers in Seattle.

Capital goes where it is welcome. It is clearly not welcome in Seattle. Buyers and investors beware.

Navellier & Associates does not own Boeing, or Starbucks, but does own Amazon, Costco, Microsoft, and Nordstrom, in managed accounts.  Gary Alexander does not own Boeing, Amazon, Starbucks, Costco, Microsoft, or Nordstrom in personal accounts.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
How to Inflate Away the COVID Debts

Sector Spotlight by Jason Bodner
How to Sign a Sweetheart Retirement Deal

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

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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