Perseverance, Hope, and Tianwen-1
It has been a pretty eventful start to the year as the momentum of the fourth quarter carried into 2021. However, as far as weeks go, this one was a return to what I would consider normal. While talk of further stimulus has pushed markets higher, this week was decidedly quiet on that front. To be fair, much of the attention focused on the trial going on in the Senate. Ultimately, it is the economy that will determine the direction of this market, and that is where we should all place our focus.
I’ve been optimistic about the economic recovery, especially as it pertains to the rollout of the COVID vaccine. While I remain optimistic, I’d be remiss if I suggested everything is rosy. This week, former Fed Chair and current Treasury Secretary, Janet Yellen, voiced concern about the labor market. More specifically, she stated she believes the labor market is stalling. As evidence for this, U.S jobless claims remain stubbornly high at 793,000 this week. While the number seeking unemployment benefits is slowly decreasing, it remains painfully high. Before the virus, weekly applications for jobless aid had never topped 700,000, even during the Great Recession. While an extension of federal unemployment benefits beyond the March 14 expiration could help, it is a band aid, not a cure. As for a cure, it appears more doses of vaccine have been acquired and will become available for most people by July. However, a lot rests on the economic expansion continuing and short of another round of stimulus, we could be in a very different situation without it.
One interesting fact about this pandemic, is that one would expect bankruptcies to be considerably higher. But that’s not the case. In fact, January 2021 new bankruptcy filings sank to the lowest monthly rate, since February 2006, with only 32,298 filings. That represents a 6% decline over December 2020 filings and a 44% decrease from January 2020. This reminds me of another stat I came across this week. Based on data from the Federal Reserve Bank of New York, 36% of stimulus payment money received by Americans from the March 2020 CARES Act was put into savings, while 35% was used to pay down debt. Presumably the remaining 29% was used for consumer spending. It is almost certainly the case that federal stimulus last year helped many people stay afloat. While a hard pill to swallow, it seems another round of stimulus will be necessary to do the same this year.
In a follow-up to a story that came out last year, you’ll remember New Jersey had proposed taxing the New York Stock Exchange (NYSE). Many of its servers and a lot of its operations are in New Jersey. To my recollection, New Jersey eventually backed down. However, this week it appears New York is considering a transaction tax on the NYSE. The president of the NYSE, Stacey Cunningham, pointed out that when France adopted transaction taxes in 2012, a third of trading volume moved to London. While New York faces a sharp drop in revenue because of the pandemic, it seems foolhardy to go after an entity that could easily move. Mr. Cunningham wrote, if lawmakers opt to reinstate the tax, the NYSE may need to follow the lead of those firms relocating [to Florida, Texas, and other states with more favorable tax policies].
In closing, something spectacular happened this week. Not one, but two spacecraft are set to arrive at Mars after a seven-month journey spanning more than 290 million miles. China’s space agency completed a key step toward landing a robotic lunar explorer on Mars when on Wednesday the Tianwen-1 spacecraft began its orbit of the red planet. Note, I said there were two. The Hope spacecraft was launched by the United Arab Emirates and began orbiting Mars on Tuesday. While only slightly behind, the Perseverance, NASA’s newest spacecraft will skip orbiting and head directly to the planet’s surface next week (February 18th). This will be NASA’s fifth mission to the planet and it hopes to not only send out a rover, but for the first time, launch a helicopter into the Martian atmosphere. For reference, it would take 1,191 years to get to Mars by getting a piggyback ride on Usain Bolt going his top sprint speed. It would take 441 years by driving 75 mph. And it would take 61 years by commercial jet (not counting the layover in Charlotte). Now you know.
Bruce J. Mason, MBA