Eye of the Storm, Dems vs China, Boris' Approval Soars

Demography Unplugged with Neil Howe

In this latest issue of my weekly podcast, I discuss the market "narrative" surrounding COVID19. The market expects immediate and total recovery with no second wave, unlimited stimulus support, and for the market to rise higher than before. But right now, we are in the eye of the storm. By June, we could be seeing the start of a second wave and waking up to the true economic damage.

Continued stimulus? Right now, both Democrats and Republicans support big government spending. We expect more spending in the near future, but this support could sour. In 2011-2012, both parties pulled back spending at the peak of the financial crisis. Will Republicans fall back on their small government stances?

Democrats challenge China. In the Obama years, Biden was the front-man on easing US-China relations. But when Trump came into office, the president took a different tone on the country, demanding new deals and starting a trade war. Yet in a stunning move, Biden has now started calling Trump weak on China. Much of this comes from China's disrespect of human rights and Trump's silence. Nevertheless, this is an unexpected turn from the former VP, who probably has spent more time with Xi than any other American politician.

Economic indicators continued to be bleak. US Markit PMI flashes were released for April. Manufacturing came in at 36.9, while services came in at 27.0, and composite read at 27.4. The Kansas Fed Manufacturing Index came in at -62 for April, its lowest reading since the series began in 2001. The Dallas Manufacturing Index had a similar record low at -73.7.

Around the world, leaders see boosts in their approval ratings. Governments that have taken aggressive action against the virus have been rewarded with soaring popularity. Johnson, Macron, Conte, Merkle, and Morrison have all had double-digit increases since February. In South Korea, the leading Democratic Party was losing support in late 2019, but in recent national elections, they won by a landslide.

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