Alan's Alert 6-1-2021

 

By Alan Baerlocher

 

Wow, so much to get to in the first alert.  First let’s take a look at the M2NSA data that was released last week.

 

13-week Annualized M2NSA Money Supply Growth

 

Money supply came in hot at 16.93%.  It is still showing as being highly elevated.  This growth in the money supply is fueled by stimulus payments, CARES act giveaways, Federal unemployment money, the US Treasury drawing down its reserves, and soon, an infrastructure bill, as well as, Biden’s $6T budget.  It’s not unusual for it to begin a dip here through the end of July.  We’ll see how this plays out when the M2NSA is released at the end of June.  Classically a dip plays into the idiom, “sell in May and go away”.  I’m not so sure that will be the case this year.

 

 

Federal Unemployment Benefits

The federal unemployment benefits are putting a real wrench in the unemployment rate.  When the government pays you more than you would make working, there is real incentive to stay on the couch.  24 GOP-led states have figured this out and are ending the federal unemployment benefits early.

 

·  June 12: Alaska, Iowa, Mississippi, Missouri

·  June 19: Alabama, Idaho, Indiana, Nebraska, New Hampshire, North Dakota, West Virginia, Wyoming

·  June 26: Arkansas, Florida, Georgia, Ohio, South Carolina, South Dakota, Texas

·  June 27: Montana, Oklahoma, Utah

·  July 3: Tennessee

·  July 10: Arizona

Ending these benefits will encourage workers to get back to work.  Many of the bottlenecks in the economy could begin to be resolved.  However, the D-led states will holdout until the Feds end the benefits. 

 

In addition to the unemployment benefits, soon money will rain down on those that have kids.  Earlier this year, the Child Tax Credit was enhanced.  Payments will begin to be sent in mid-July.  It will be $250 per child per month for kids aged 6-17 and $300 per child per month for kids less than the age of 6.  This will add pressure to the M2NSA.

 

 

 

Personal Consumption Expenditures comes in hot

 

More signs that the inflation wave is on, personal expenditures rose to 3.1% Y/Y.  You have to go back to June and July of 1992 to find a comparable reading.  This summer is going to be hot, but inflation will be hotter.

 

 

Economic Policy Uncertainty Index

 

The EPU index continues to resolve to the pre-covid baseline.  This indicates to me that the news is starting to move on and this will cause consumers to be ready to get back to normal.  When inflation begins to become prevalent, I expect this index to begin to rise.

 

 

Important and Potential Market Moving Events This Week

Tuesday, June 2

10am Construction Spending

10am ISM Manufacturing Index

 

Thursday, June 3

8.15am ADP Employment Report

10am ISM Services

 

Friday, June 4

8.30am Employment Survey

10am Factory Orders