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Population Growth Is Slowing. Why that Matters for the U.S. Economy – Barron's

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This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.

Alarming Demographic Trends

Economics Group

Wells Fargo Securities

wellsfargo.com

Dec. 29: The U.S. population increased 0.4% in 2020, to 329 million, marking the lowest growth rate since at least 1900. With a falling birth rate and an aging population, overall growth has slowed over the past five years. In fact, 2020’s projection will likely close out the slowest decade of population growth in the nation’s history. Stalling population growth could have major implications for potential economic output in the longer term. While these estimates precede and are collected independently from the 2020 decennial census, they provide useful insight into national and regional population trends.

Sixteen states saw growth pick up over the year, and 34 states are growing. Residents continued to flock to the West (+0.5%) and the South (+0.8%), which saw the largest gain of the Census regions. The South added just over 976,000 residents in 2020, with Texas (+1.3%), South Carolina (+1.2%), and Florida (+1.1%) posting the fastest increases and each ranking among the top 10 fastest-growing states. In the West, Idaho (+2.1%), Arizona (1.8%), Nevada (+1.5%), and Utah (1.5%) contributed nearly three-quarters of the region’s 354,000 population gain and saw the healthiest growth rates in the country. An affordability migration away from high-cost urban centers is helping fuel population growth in these regions.

Previewing December Jobs Data

Commentary & Analysis

Maria Fiorini Ramirez

mfr.com

Dec. 28: Friday, Jan. 8, delivers the December employment report, along with November wholesale inventories and November consumer credit. The jobs data are tougher than usual to predict, with complicating factors including sizeable holiday-related seasonal adjustment that may distort outcomes, as patterns are anything but normal at the moment. Other tough-to-assess factors include the degree of pandemic-related softness in the service sector, and the speed at which underlying gains are slowing as the initial post-lockdown bounce fades.

With those caveats in mind, expectations concerning December nonfarm payrolls are widely scattered (the overall range is currently -175K to +200K), with very early medians of roughly +60K for the total and +75K for private payrolls. The unemployment rate is seen remaining near the previous 6.7%, the average workweek is generally expected to remain at 34.8 hours, and the median forecast for average hourly earnings is for a 0.2% month-to-month gains.

Investors, Beware Complacency

Weekly Technical Review

Macro Tides

macrotides.com

Dec. 28: Investors truly believe that markets are a discounting mechanism and that the stock market is now telling them that 2021 is going to be a good year for the economy. This conclusion is easy to reach if one believes vaccinations will proceed without a hiccup and herd immunity will be achieved by mid-2021. But the majority of investors are wrong at important turning points, which is why the majority of investors are bullish as the market peaks and bearish when it bottoms. Measures of investment sentiment show that investors are currently wildly bullish, so the risk is that they are too complacent about the near-term risk of a Perfect Covid-19 Storm and how smoothly the vaccines will be distributed in coming months. If this assessment is accurate, the stock market could be vulnerable to a quick, sharp correction, as investors are confronted with a less rosy perspective. If the stock market experiences a correction in January, Treasury yields will fall as bond prices rise. Gold, silver, and gold stocks will decline and the dollar will bounce.

Personal Savings Rate Soars

Telemus Special Market Commentary

Telemus

telemus.com

Dec. 28: The Federal Reserve Bank of New York compiled a useful analysis in October, examining what happened with the first round of stimulus payments that were issued this past spring. In summarizing their analysis, roughly one-third was saved, one-third was spent, and one-third was used to pay down debt. The New York Fed also surveyed where further rounds of direct payments might be allocated. Respondents indicated that a greater percentage, roughly 45%, of any future stimulus would be saved. Since the pandemic began, the personal savings rate has accelerated. Prior to 2020, Americans had been saving between 7% and 8% of their income. The savings rate spiked to 33.7% in April, and while trending down, remains elevated at 13.6% as of October. We expect a meaningful portion of the latest round of direct payments to be saved, further strengthening the financial position of the average consumer.

Georgia (Election) on Our Mind

Cumberland Advisors Market Commentary

Cumberland Advisors

cumber.com

Dec. 28: As we enter 2021, we are very focused on the Jan. 5 Senate runoffs in Georgia. A Democratic victory in both races puts that party in control of both houses of Congress, along with a new Democratic administration led by President-elect Biden. Our view is that this outcome would lead to more spending—in greater amounts and on a faster pace than if the Republicans hold the Senate, which they can do with a Republican outcome in either race. We think bond market participants will start to discount increased spending, and perhaps a higher inflation rate, and that may cause yields to rise. We believe this will happen even with a Republican Senate, although at a slower pace. President-elect Biden still has good relationships with senators who were in office when he was a senator more than 12 years ago, and those relationships should foster some measure of greater cooperation. We think we’ll see rates back to where they were at the end of last year; but certainly, halfway between where they were then and where they are now is a reasonable approximation of where we think yields will be midyear.

A Brighter Outlook for Tin

Ahead of the Herd

Northern Venture Group

Aheadoftheherd.com

Dec. 23: Tin isn’t the most exciting metal, but it will play an important role in developing a new economy, reliant on green energy, electric vehicles, and advanced technologies like 5G, the Internet of Things, and artificial intelligence. For such a small market, tin has an impressive array of current and potential uses, putting it in the same league as silver, as a metal essential to modern electronics. Its primary use in tin-lead solder practically guarantees tin will enjoy steady demand for years, maybe even decades to come. This more than makes up for tin’s declining usage in kitchen foil and metal beverage containers.

This year, the tin price took a hit from the pandemic, but stormed back, gaining 45% since a mid-March low. When global economic growth resumes, following the rollout of vaccines, demand for tin and other industrial metals will surely pick up. When we factor in current and future supply shortages predicted by the experts, tin looks increasingly like a metal that forward-looking resource investors should have on their radar.

Email: editors@barrons.com

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Economy

Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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The economy is ailing again and layoffs are rising, but vaccines offer hope for cure – MarketWatch

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It’s not just the lives of Americans that rest on a quick rollout of coronavirus vaccines, it’s the livelihoods of millions of people who lost their jobs during the pandemic.

Almost every forecast for the U.S. economy predicts a big rebound in growth and employment in 2021, but it sure doesn’t feel that way right now with the coronavirus still spreading like wildfire.

The last few weeks alone have shown weaker hiring, rising layoffs, and declining consumer spending, all of which point to a faltering economy.

Many businesses have closed, cut their operating hours and laid off workers, leaving some 10 million Americans who had jobs before the pandemic still out of work.

Also: The U.S. lost 140,000 jobs in December. How bad was it?

The bad news hasn’t stopped investors from piling more money into the stock market, however. They are also betting on a big rebound in the economy this year and next.

What they are watching most is the speed at which the vaccines are administered, how rapidly the pandemic recedes and what steps new President Joe Biden will take to boost the economy until the crisis passes.

Read: Consumer inflation increases in December on higher gas prices

Does that render moot the next month or two of economic data, the stuff that usually moves markets. Not all all.

These reports will tell us how much ground the economy has lost in the past few months, how much ground it has to make up —- and whether the hoped-for snapback in the economy is actually underway.

“Do the data over the next few months matter? They certainly do,” said Richard Moody, chief economist at Regions Financial.

The key measure to watch is weekly jobless benefit claims, one of the few weekly government reports that’s very sensitive to changes in the health of the economy.

See: MarketWatch Economic Calendar

Jobless claims, a rough measure of layoffs, began to rise again in November just as the latest and biggest wave of coronavirus cases spread across the country. Last week new claims surged to almost 1 million from a pandemic low of 711,000 two and a half months ago.

Read: Jobless claims surge to 5-month high of 965,000

The report is not without its problems. A government watchdog agency found that jobless claims have been inflated during the pandemic.

Read: Jobless claims inflated, GAO finds

Also: Why the inaccurate jobless claims report is still useful to investors

Yet the direction of jobless claims has largely followed the path of the coronavirus cases and the resulting ups and downs in employment.

The latest snapshot on claims will be the most important report next week after the Martin Luther King holiday which closes financial markets on Monday, but most attention next week will be directed toward the inauguration of President-elect Joe Biden on Wednesday.

Read: U.S. budget deficit climbs to $144 billion in December – and more red ink on the way

On Thursday Biden outlined a sweeping new proposal for up to $2 trillion in federal spending that included $1,400 cash payments to households, supplemental unemployment payments, and money for distributing COVID-19 vaccines, among other items, but it’s unclear how much will eventually pass Congress and how long it will take to filter into the broader economy. Stay tuned.

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Economy

Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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