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What’s happening: Over the weekend, the Bank of Wall Street downgraded its forecast for U.S. economic growth, which is being closely watched by the investment community. Goldman Sachs now expects the economy to grow 5.6% this year, down from a previous estimate of 5.7%. In 2022, growth is expected to increase by 4%, compared to 4.4%.
This is the second time Goldman Sachs has revised its 2021 forecast downward in two months.
Break it down: The bank’s team of economists said two main factors caused its outlook to change. One is that Covid-19 relief programs are expected to end “considerably” until the end of the year, eliminating a source of income for some households.
The other concern is that consumers are not distributing enough money in services to compensate for a decrease in spending on goods.
“Consumer spending on services will need to recover quickly to offset lower spending on goods as the latter normalizes from its current high level,” Goldman Sachs told clients. “It will likely prove difficult as long as Covid cases remain high, as many people still feel at least somewhat uncomfortable engaging in many activities that were routine before the pandemic. “
Goldman Sachs also believes expenses could decrease as people continue to work from home, encouraging them to cook their own breakfasts instead of going to local restaurants.
Another perspective: Bank of America, for its part, was encouraged by spending trends gleaned from US credit and debit card data. “We believe the recent drop in cases has helped allay concerns about Covid,” said Candace Browning, head of BofA Global Research.
The bank found that daycare spending in September was 52% higher than last year’s levels and only 13% lower than the same period in 2019, which it called an “encouraging sign.” He also observed that spending on travel and entertainment “is improving”, although the gains have not been felt evenly across the country. People have been much more willing to splurge on entertainment in Florida than in states like New York and Pennsylvania.
Bottom line: The whole picture for Covid-19 in the United States looks a little brighter as new infections and hospitalizations decline.
“I hope it will continue on this downward trajectory,” Dr Anthony Fauci, the country’s leading infectious disease expert, said on Sunday.
But the country is still reporting around 95,000 new infections a day, which Fauci says is “way too high.” This makes it difficult for economists to chart a course for the US economy.
Watch this space: US banks have a good understanding of the health of US buyers as they track the flow of money. Investors will be watching their comments on the matter closely when they release their results later this week.
Netflix Boosts Retail Offering With Walmart Deal
“Walmart is now the official one-stop-shop for bringing home your favorite Netflix stories,” Walmart director Jeff Evans said in a blog post.
The backstory: Netflix launched an online store in June – a sign it was interested in adopting the model pioneered by competitor Disney, which makes tons of money from its intellectual property with theme parks and clothing sales.
The Walmart deal says it is stepping up its efforts. It makes sense.
While Netflix is rapidly growing its international subscriber base, especially in Asia, it lost 433,000 subscribers in the United States and Canada between April and June. The partnership with Walmart opens up a new way to generate revenue and could spark more interest in its shows among buyers.
Investor Snapshot: Netflix stocks had struggled to break through this year. But they recently staged a comeback, hitting an all-time high last week as investors were excited about the success of Korean thriller “Squid Game” (which I devoured, though I’m here to tell you about the markets, no television).
“Squid Game can help open up the [Asia-Pacific] region, ”said Doug Anmuth, analyst at JPMorgan, in a recent note to clients.[And] it’s another example of local content that travels well around the world. “
Does Russia benefit from taking advantage of the energy crisis?
A global rush for natural gas has put Russia in a position of strength. At least that’s what investors think.
Rising energy prices could be a boon for the Russian economy.
“As the world’s largest pipeline gas exporter and [liquefied natural gas] As an exporter, Russia appears to be a winning beneficiary of the tightening market, ”Vitaly Yermakov, a researcher at the Oxford Institute for Energy Studies, said in a report released last month.
But there are questions about how much the country can realistically increase production. In a recent note to customers, Bank of America said Russian gas giant Gazprom may have “limited” ability to deliver additional volumes as it is still working to meet domestic needs. In addition, it “is already producing near a 10-year high”.
Following
Bond markets are closed in the United States for Columbus Day. The shares will trade as usual.
Coming tomorrow: The latest data on US job openings as employers in industries like hospitality struggle to fill vacancies.
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