S&P 500 futures are flat/mixed as investors try to figure out the nationwide riot effect on the market. We were on pace for a continue bull run because America is opening up, but it will be likely delayed for a week as the government gains control of the rioters.
Robert Kaplan of the Federal Reserve is calling for 17% GDP growth, and Larry Kudlow, a White House Ecomonmic Adviser, believes that figure could be as high as 20%. Consumer-oriented companies are increasingly more positively in terms of spending behavior.
In an interview with Reuters, Kaplan said the gross domestic product could grow by 17% in the third and fourth quarters of this year. The head of a regional central bank said much of the recovery in the second half of the year was based on increased testing of COVID-19, said Robert Kaplan.
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Kaplan believes the increased testing will boost explosive growth in the second half of 2020. He believes that by identifying and isolating infected people, more people will be able to resume their normal daily lives. The unemployment rate is expected to reach 20% in the second quarter but could fall to 10% by the end of the year.
Meanwhile, Kudlow, a White House adviser, said the US could see economic growth of 20 percent. He also believes that the testing process would cost less than the vast resources allocated to the current rescue of the financial system and the economy. The government has invested $6.6 trillion since 2008, with at least $3 trillion spent on bailouts, according to a recent report from the Federal Reserve Bank of Chicago.
The former Wall Street economist said the number of new business applications is increasing, as are car consumption and fuel demand. He also pointed to falling unemployment figures as a positive sign for the US economy and an increase in business investment.
Kudlow expects the numbers to point to persistent economic problems in the coming weeks, but he believes we are not yet at the peak of unemployment. He said the pandemic is still slowing because of data delays and effects.
He would like to see some policy changes to boost growth potential, but he is skeptical of President Donald Trump’s plans for tax cuts and spending cuts. He is a board member of the American Enterprise Institute and the James A. Baker Institute.
He believes that the domestic economy is experiencing the worst downturn, but he also believes that we are already recovering. It expects growth to accelerate in the second half of the year and expects the US economy to overtake the global economy by the end of 2017.
Most of the recovery is spent outside travel and entertainment (T & E). Spending outside the US fell in the low single digits in June, compared with a 25% drop last month. Overall, market analysts are optimistic about the trend in consumer spending.
Discretionary spending had increased in recent years, compared with recent years when individuals bought only the bare essentials. But now, as economies everywhere recover, spending is improving steadily, he said.
American Airlines said its flights were 35% full in May, up from 15% in April, and recently announced 100 new routes this month. Southwest Airlines says flights will be 25% to 30% fuller in June, compared with an expected 10%. United Airlines expects capacity to be 25% to 30% fuller in June, compared with an expected 90% decline in May. The company said there had recently been days when ticket sales exceeded reimbursement. It is now aiming for a maximum capacity of 60% of flights to take social distance.
This should increase the available space and make it easier for the company to transport goods from home and abroad again. It should also help to stimulate demand for oil as the number of flights continues to increase.
If this trend continues and further progress is made, COVID-19 will continue to support the US economy and the US stock market as a whole on the vaccine treatment front. This is a positive sign of economic recovery and will help given that the US government is likely to be able to adopt a larger stimulus package in the second half or third quarter of this year.
Markit U.S. Final Manufacturing PMI for May (9:45 a.m.)
Construction Spending for April (10 a.m.)
ISM Manufacturing for May (10 a.m.)