Rosenberg Research President David Rosenberg told CNBC: “We have to be ready here for the economy to collapse in the next few months.” Concerns over the delta variant of Covid-19 and skepticism about the Biden administration’s economic plans are making Wall Street uncomfortable as August approaches.
GDP (gross domestic product) disappointed last week, falling nearly 2% behind most growth figures estimated at 6.5%. The delta variant adds more uncertainty to the number as fall approaches with colder weather on the horizon and pockets of the country considering more restrictions.
Stock indexes are all close to all-time highs, but potentially disappointing unemployment figures could see August as a month of turmoil. Some analysts, including Rosenberg, believe the economy is not as strong as stock performance suggests.
Additionally, as home prices rise, retail investors may be more confident than the underlying numbers suggest. Small cap stocks have already shown signs of weakness. Analysts said the economy looked like 2000 before the market pulled back. Several European countries are also considering new containment measures.
On a positive note for the Biden administration, the US Senate will seek to pass legislation for a $ 1,000 billion infrastructure bill that is now considered to have bipartisan support, with up to ten Republicans. ready to vote for the bill. Majority Leader Chuck Schumer called it out “imminent” and said it will likely be confirmed this week.
The perceived need for an infrastructure bill has been around since before the Trump administration, but has not materialized due to traffic jams. The bill expected to pass will include an additional $ 550 billion in new spending beyond what had already been passed, according to Reuters.
Banks posted strong earnings in the first two quarters of 2021, and despite the uncertain economic outlook, analysts still favor bank stocks.
While the markets may show some uncertainty, the trends still seem to favor the banking sector in the United States, particularly on the retail side.