We hope this week's update finds you well and safe. Here a few takeaways from our attached market update.
- Earnings season kicked off last week with JP Morgan, Citigroup, and Wells Fargo reporting. We listened in on JPM's analyst call, where CEO Jamie Dimon provided encouraging news that was tempered by his concerns over economic uncertainty. While the bank was able to reduce their loan reserves--very positive and much earlier than many had expected--there is not yet an expectation of increased loan demand in 2021. We find the reserve reduction a strong signal that the economy is on the right track, so long as the new administration delivers on the policy side to keep the bridge in place.
- The banks also noted the huge increase in deposits as many stimulus checks went unspent and some of the PPP loan proceeds remained in deposit accounts. This is an enormous amount of liquidity that may very well be unleashed into the economy as we exit the pandemic later this year, with consumers spending on travel, leisure and entertainment. And they likely won't blink at price increases as we get closer to a return to normalcy.
- High levels of liquidity combined with pent up demand are setting the stage for increased inflation in 2021 and beyond. We are already seeing spikes in commodity prices showing up in the food chain. And with global growth predicted at 5.8%, oil may very well move to $60 per barrel, moving consumer price inflation above the 2% target set by the Federal Reserve. On top of this, the latest stimulus plan put forth by the incoming Biden administration will add big to the already high levels of liquidity in the system.
- This week we will get a flood of earnings announcements and hopefully more visibility on what CEO's are seeing for 2021.
Our full recap of last week's events is linked below.
As always, please feel free to reach out to us to set up a call or meeting.
The FMA Advisory Team