CEO Tony Nash joins CNA’s Asia First program to explain the logic behind the US market’s performance. Will the better-than-expected retail sales continue to the Christmas season? What is his outlook for Q3 and what’s hampering the economic recovery in the States? And what are at stake around the success of the $3.5T infrastructure bill?
This video segment was published on September 17, 2021 and is originally from Channel News Asia’s videos on demand, which can be found at https://www.channelnewsasia.com/watch/asia-first/fri-17-sep-2021-2186306
CNA: Well, Wall Street closed mixed in the State overnight as the major indices fail to build on Wednesday strong performance, while for the session, the blue chip Dow closed lower by two tenths of 1%, and the S&P 500 fell by a similar percentage.
However, the Nasdaq managed to eak out second consecutive day of gains. Well, this after investors digested mixed economic readings released before with the opening Bell when August retail sales surprised the market and rose 0.7% from the month prior, with analyst expecting a decline. But on the downside, jobless claims rose from last week’s pandemic low.
Of course, to help us understand the logic behind all the market movements were joined by Tony Nash, founder and CEO with Complete Intelligence, speaking to us from Houston, Texas. Very good evening to you, Tony.
So we’re looking at the better than expected retail sales number. And do you expect that momentum to continue given that we are 100 days away to Christmas in the State side and 99 days away from here in Singapore side.
TN: And we certainly hope that continues. But it’s really uncertain, given some of the corporate outlooks and given some of the other indicators that we’ve seen: purchasing managers indices and the regional Fed reports, Fed Manufacturing reports.
The port hold-ups in Long Beach are not helpful either. It’s really hurt supply chain. So we could see that spending tick up. But we do expect prices to continue to rise. And so there’s really a trade off there in terms of the volume that’s sold and the value that’s sold. And when we’re looking at, say a 1% rise in value of retail sales, that’s quite frankly, not even keeping up with inflation.
CNA: In the meantime, we’re also seeing that the weekly jobless claims increased. And of course, before that, many economist with organizations like JP Morgan has downgraded their third quarter economic growth outlook. So what is your outlook there and what is hampering economic recovery over there in the State Side?
TN: Well, it’s really companies are not seeing great investment opportunities. So the demand for credit in the US, just like in China, and just like in Europe, the demand for credit is really declining.
So we’re not seeing companies spend on big ticket items. They’re not investing on new equipment, they’re not investing on new projects. And so that’s hurting everything downstream because there are impacts across the economic spectrum when companies decide to spend on big ticket items. This is hurting the US. It’s hurting China. It’s hurting Europe.
So between now and you mentioned the end of the year, we expect that corporate spending to have an impact, the damper in corporate spending. We expect the supply chain difficulties and inflation have impacts as well. And if unemployment continues to tick up like it did, we could have a very difficult Christmas season. And the Fed and city administration here in the US are really contending with that, because as they go into the last quarter of the year, they’d really like to see things tick up.
CNA: And talking about those spending of course, there’s one catalyst that investors are watching out would be the passage of the $3.5 trillion infrastructure bill. But given the situation that a Biden is facing now, do you think that this increasing likelihood that this bill can’t be get past?
TN: Yeah, I think you’re right. With the failed withdrawal from Afghanistan, Biden has really lost a lot of the support from Democratic moderates. And so he’s got the support of the extreme left Democrats. But a lot of the Democrats in the middle are really starting to say, “Hold on a minute. We need to be really careful about how much we support Biden,” because those guys have to be reelected in November of ’22. So from here on out, the voters in their respective districts will be paying a lot of attention to what they’re doing.
This 3.5 trillion infrastructure plan, only 1.2 trillion of it, I say “only” but 1.2 trillion of it is dedicated towards real hard infrastructure. The rest of it is a lot of social spending, a lot of pet projects, and that’s a lot of money. 2 trillion plus dollars.
So Americans are really tired of seeing big stimulus programs put out, and they’re really tired of seeing the pork going to people connected to politicians. So they’d much rather see the lower $1.2 trillion program. It’ll go direct to infrastructure. They’ll see it. It’ll be a very tangible spend.
One other thing to keep in mind is there is still $300 billion that haven’t been spent from the stimulus program that came out in Q1 of 2021. So a lot of Americans are asking, why do we need to green light another three plus trillion dollars in spending if we still have $300 billion that’s unspent?
CNA: All right, Tony, thank you so much indeed, for your analysis. Tony Nash, founder and CEO with Complete Intelligence.