We continue to share a collection of charts that we hope you find relevant in understanding the current investment climate.
This month’s Chartbook shows the following:
- To cope with the COVID-19 tragedy, the Federal Deficit exploded sending overall Federal Debt to record levels. Our government spent enormous amounts to keep the economy running. However, due to the panic and the shutdown of many businesses, much of this newly minted cash wasn’t fully spent, holding back transactional velocity thus economic activity.
- Now, with the vaccines, America is starting to return to normal. There are clear signs that economic activity is rebounding along with some corresponding inflation
- While interest rates dropped to historic lows during the worst of the COVID-19 panic last summer, the yield on the 10-year U.S. Treasury bond is now back to Pre-COVID levels. This rise has recently been concerning, but interest rates are still extremely low. Rising from 0.4% back to just under 1.5%.
With another stimulus package coming from Congress and the return to normal economic activity, it is going to be important to watch how all of this government spending affects consumer spending, inflation, interest rates, and stock prices. A modest rise in inflation and hence, interest rates, should not be a threat to the stock markets. It may be a positive sign of the return to economic growth.
As always, know what you own, do no overinvest, and stick with quality.
-Cliff Jarvis