CFO Focus: Tug-of-war economy in fourth quarter

The million-dollar question is: Who wins with regard to the yield curve, the bull flattener or the bear steepener?

We come into the end of 2020 with historically low interest rates, historically high equities, historically tight credit markets and more serious questions than we’ve faced since World War II! The only thing that I feel comfortable predicting overall is that volatility will be heightened and probably extreme.

The two biggest concerns for the economy are COVID-19 and the November presidential election. These concerns bring these questions:

  • Will the pandemic worsen as we head into cooler months and flu season, again shutting down the economy and society, or will there be a vaccine available by early 2021 to begin to unwind the damage done?
  • Who will win the Presidency in November, and will the loser accept the outcome?

The COVID-19 pandemic continues to press down on society. When it first broke out, the White House and Congress came together and passed a historic fiscal stimulus and relief package, while the Fed unleashed monetary stimulus of biblical proportions. Unemployment skyrocketed; businesses failed at record rates; municipal finances were ruined; and the national economy essentially shut down. However, the fiscal and monetary policy support at least partially blunted what would be depression-like effects to society, such as housing and food insecurity, loan defaults and repossession of assets.


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