Treasury yields dropped slightly and stock market rallies took a pause. Why? Critical negotiations on U.S. Covid relief in Washington and the UK/EU Brexit talks are both hitting stumbling blocks with deadlines for both looming this weekend. The 10 year T is at 0.93%. Last Friday’s November’s weaker than expected jobs report indicated a sputtering recovery with slowing job growth. The data combined with rising Covid caseloads/hospitalizations have added further urgency to Congressional and administration stimulus negotiations. It looks like they are kicking the can into next week with a 1 week government funding extension, creating a must pass date for next Friday, December 18. Congress will then recess for the year and a “no deal” would allow jobless benefits, student loan forgiveness, eviction moratoriums, Fed assistance programs and more to expire. The failure to act would also deprive the economy of badly needed stimulus.
“V-Day” in the UK this week: vaccinations have begun! The world saw the Pfizer vaccine being administered to elderly citizens of the UK this week. The U.S. FDA is expected to approve the Pfizer vaccine this week and shots could begin in the U.S. next week. The UCLA Anderson School Economic Forecast, “A Gloomy Winter Followed by An Exuberant Spring” was released today. It predicts a robust “service recovery” led by healthcare, restaurants, recreation, travel and accommodation in 2021. Analysts have estimated that U.S. consumers have about $1.3 trillion in excess savings built up during the 2020 pandemic. As most consumer goods have been available for purchase with the boom in e-commerce, the thinking is that there is big pent up demand for travel, entertainment, live events, etc. This can’t come soon enough for the beleaguered hotel and retail sectors. A look at hotel loan maturities shows over $20 billion of hotel loans maturing in 2021 (as opposed to about $8 billion this year and an average of $7 billion for 2022-2029. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners