-This week investors will be aware of the data on the trade balance, the Fed’s decision on rates and, in addition, the GDP will be known, which, according to estimates, could go from 4.3% to 5.7% . In addition, it is a week for the presentation of business results.
-The indicators should continue to be positive, especially those of GDP, whose estimates had already been announced by the IMF, the US government, as well as financial analysts. We have had a rebound and we are going to have another rebound greater than expected, above 5%, after having decreased less last year. However, the bulk of the rebound will be in the first half of the year. Goldman Sachs calculated that it could reach 9.8% but already, being at the end of April, what remains of this rebound is marginal growth. In addition, it is a market that always tends to be 12 months ahead of what happens, the question will be whether this growth will be maintained in the second half of the year. If we talk about 12 months, what will happen next year?
According to the IMF, the US will grow 3.5% in 2022, above the average of 2.5% after the 2008 crisis, more similar to the growth after the Second World War until the mortgage crisis. The next question would be how much it will grow in 2023.
If we grow 2.5% again, the markets would have to modulate based on that and the inflationary pressure, which is beginning to be felt in certain goods, particularly those of supermarkets, could generate certain inflationary expectations that have not yet been diluted in the market but could change the perspective of the FED, which continues to see the global inflation indicator below the established goals. No one expects rates to go up this year or even next.
-As for business results, this Monday we learned that Tesla’s soared 74%, why?
-The sale of electric cars has been higher than expected, regardless of the noise generated in China. In addition, it has influenced its position in bitcoin that it attracted so much attention for its 1.5 billion dollars (10% of Tesla’s cash). When the company announced the sale of 10% of that position, it made a profit of 100 million dollars, which contributes to these results. However, we will see what happens next quarter because bitcoin fell from its peak of $ 65,000 to levels of 50,000, it recovers marginally, but that loss of Tesla’s position in bitcoin will be reflected in the coming quarters.
Big technology companies are doing well. Based on the Nasdaq and the cyclical rotation, which does not finish consolidating and should feed the markets. The problem with technology is that the well-known ‘stay at home play’ will remain in the background, with the new reopens and the announcements that Biden will make this week about the modifications to quarantines or restrictions: it is expected that the no mandatory use of a mask and the reopening of European tourism to the US in summer. This could play against tech companies in the quarters to come.
-As for reopening, Europe is already considering opening borders to vaccinated Americans. We will see if the global economy improves with this. In New York, Wall Street closed with highs this Monday, with a record of the S&P 500 that reached 4194 points and last Friday finished well due to positive data, such as the manufacturing PMI for April, which rose and also the services PMI, with figures not seen in months. Will these data drive growth in the US economy?
-They are still in line with this rebound and economic recovery that goes hand in hand, as the IMF mentioned, with fiscal support and vaccination. Part of the new US growth estimates are due to the Biden Administration’s $ 1.9 trillion bailout plan, announced and approved in less than 100 days.
The Administration’s next bet is the American reconstruction plan which he expects to be approved in September. A much larger and longer-term plan that should continue to keep the economy in a growth process, not just recovery.
The Administration has already said that this plan will be financed not with debt but with taxes.. The market became very nervous when the idea of increasing corporate taxes from 24 to 28% and capital gains taxes from 20 to 40% practically was announced. However, the market this week begins to elucidate that these capital gains taxes are for people who have assets above 1 million, which excludes almost three-quarters of investors and hence the market recovers its trend growing, although still shy.
The problem with the market, after having had such an important rally with the quarantines, is that it is shy, it does not finish rising because the valuations are still very rich.
-Those taxes on the richest will finance Biden’s infrastructure plan. In addition, it seems that the president has decided to bet on clean energy. Do you think that this commitment to clean energy and a 50% reduction in greenhouse gases by 2030 will bring new jobs? Or, on the contrary, will it affect jobs in the oil sector?
-The energy sector, particularly oil, had already been affected before. Peak Oil, global oil reserves, was historically declining but was reversed by shale oil, fracking. That sector is not exactly the Biden Administration’s favorite. The North American reconstruction plan involves a substantial investment in infrastructure with a new perspective. He talks about a human infrastructure, where there is a discussion between Republicans and Democrats: if people are considered as infrastructure or not. I think it is going to be elucidated in favor of the Biden Administration and alternative energy infrastructure, what is known as the global energy transformation under the Paris agreements.
This investment in green energy will not only generate new jobs – the plan contemplates the creation of 18 million jobs in 10 years – but also, in the long term, could generate a substantial reactivation of investment in the US and achieve an impact global as it marks a renewal in the matrix of metals and minerals. Today copper is the king of metals, as the 5 megawatt wind towers being built are the size of the Statue of Liberty and the new 12 megawatt towers are the size of the Eiffel Tower. The demand for metals and minerals will grow and favor emerging energies and could generate, if applied, a boom in terms of employment and growth similar to Franklin Delano Roosevelt’s ‘new deal’ of the 1930s.
-We are talking about large long-term projects, but in the short term, how is the situation for citizens at the moment? Are you already seeing the recovery?
-As the pandemic is global, we are in the middle of a third or fourth wave, where the new epicenter moves to India, where the situation is dramatic due to the population (the second largest after China).
Until vaccination and tax bailouts are global, the recovery of the economy and mobility will not fully occur. New York City will receive 38 million tourists. There is a plan by the city hall to encourage tourism in the city but no one expects it to return to what it was, so this recovery is not going to be frank or open. Hence, each epidemiological wave comes with an economic and financial hangover that affects the middle classes, according to the IMF.
In the US, despite the drop in unemployment, we continue to have a significant number of unemployed, to which must be added structural unemployment and the participation ratio. thus, the level of unemployment is relatively important. Hence the rescue plan is vital. Only the tax benefits for families with children up to 17 years old, calculate the White House economists, will reduce child poverty in the US practically in half. In New York City, the nation’s largest school district, 44% of students depend on going to college for their food. This is why the school closings were so dramatic and the Food Banks have been vital.
This compensation in the rescue plan, allows middle-class citizens to weather the storm. This will allow the US to grow by rebound this year by almost 6% and 3.5% next year, as well as maintain growth rates of 3% in the following years. We will grow again 2% later, which is not enough to compensate for the effects of the crisis generated by the pandemic.
-Don’t you think the United States can get out of the pandemic alone if it doesn’t get out globally?
-Completely. The race for the vaccine is not enough (80% of Israelis, 70% of Americans, 47% of Chileans …), if it is not global and allows the world to recover its dynamics, it is useless. According to Bill Gates, there will not be a frank recovery in the global economy until the end of 2022.