Summary
-Initial unemployment claims are down, but millions are still out of work
-Unemployed workers are staying unemployed for longer
-Continued volatility is expected into the election

Hi there—here is this week's update!

Unemployment

We received the last jobs report from the Bureau of Labor Statistics before Election Day, and the unemployment rate is now at 7.9%.

While not as bad as April, when over 20 million jobs were lost in one month, this number is still monumentally high.

With millions still relying on jobless benefits to get by, the news isn’t looking good. In previous updates, we mentioned how we anticipated large corporate layoffs to pick up, and we’re starting to see more data to substantiate this viewpoint.

Just this week, Disney said it would lay off 28,000 people, while American Airlines and United Airlines announced 32,000 in job cuts. There is now additional data from Yelp showing that nearly 100,000 small businesses have permanently shut down since March.

The need for stimulus

Consumer spending accounts for about two-thirds of GDP in the U.S., and Americans are staying jobless for longer.

Unless companies start to hire more workers soon, or there is a major change in jobless benefits, many Americans will have no money left to spend.

While savings accounts are being depleted, Congress is still unable to come to an agreement. At this rate, a stimulus bill is unlikely to pass before the election.

Expected volatility and our outlook

There is already an expectation for elevated volatility in the markets due to the upcoming election. With President Trump testing positive for COVID, we’re expecting it to be even more of a bumpy ride.

Our view is that there is still a lot of downside potential in stocks, and as we see potential entry points, we'll continue to buy in.

We’re continuing to see value in fixed-income securities that the Fed is not buying.

There’s good value in asset-backed securities, like CLOs. For example, you could buy a BB-rated CLO tranche cheaper than a BB-rated high-yield bond, or even a CCC-rated high-yield bond. This means that as an investor, you're potentially able to get a higher return for a similar risk profile.

See you next week,
-Saul & The Round Team

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