The Week in Review: December 21, 2020
Rising COVID Cases Hamper the Economy
Daily COVID-19 cases have jumped, and many state officials have introduced new restrictions, which is beginning to have an impact on the economy.
In November, retail sales fell 1.1%. Ex-autos, sales were down 0.9%. As Figure 1 illustrates, sales came roaring back earlier in the year thanks to generous jobless benefits, $1,200 stimulus checks, job growth, and the re-opening of businesses.
But the economy and the unemployment rate have not returned to pre-pandemic levels, and the uptick in cases is creating new hurdles.
Layoffs, as measured by the Department of Labor’s weekly first-time jobless claims, have also turned higher. If we can point to one silver lining, we’re not seeing the kind of surge in layoffs we saw in March.
A Tale of Two Industries—Groceries and Restaurants
When the pandemic hit and lockdowns began, consumers rushed out to stores to stock up on staples.
We see that with the surge in sales at grocery stores—see Figure 2. Meanwhile, as lockdowns began in March, patronage at restaurants fell sharply.
Sales at restaurants have bounced back but remain below pre-pandemic levels, while activity at grocery stores remains well above pre-COVID levels. It helps explain why aisles are not fully restocked.
Note that sales turned down at restaurants in November, but we saw an uptick in activity at groceries last month. New closures and increased restrictions appear to be funneling dollars and customers away from restaurants and back to grocery stores.
While the economy is feeling pressure from new restrictions, some sectors continue to support overall economic activity, including the strong housing sector.
Forecasting the economy short-term is dicey. However, given recent action in the stock market, investors still believe we will see a stronger economy in the middle of next year, even if the path to improvement isn’t a straight line.
If you have any questions or concerns, feel free to reach out to me, Will, or Tyler.
Two for the Road
Lumber is the most reported material shortage among commercial contractors, and the problem is getting worse. The National Association of Home Builders estimated the spike in lumber price has increased the price of a single-family home by over $16,000 this year. —National Association of Home Builders
Between 1970 and 2000, the amount of added sugar in the American food supply rose by 25%, or about 22 teaspoons of added sugar per day. —CNBC December 11, 2020
This commentary reflects the personal opinions, viewpoints and analyses of the Stordahl Capital Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Stordahl Capital Management, Inc. or performance returns of any Stordahl Capital Management, Inc. Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.