Summer 2020
Submitted by Atlas Indicators Investment Advisors on June 19th, 2020
Summer is a day away. Tomorrow America will have more sunlight than any other day this year as the north pole reaches its maximum tilt toward the sun. After that the balance begins to tip back toward night. Despite the growing duration of darkness, the temperatures will continue rising for several weeks, eventually leveling out and remaining generally elevated even into the first part of the Fall season which starts on September 22nd this year. The phenomenon of the hottest weather not coinciding with the solstice is caused the lag of the seasons.
Effects of monetary and fiscal policies also come with considerable lag. America’s economy was virtually shuttered for a few months, and we are just starting to get an understanding of the magnitude of the closure’s impact but still don’t fully know the how long it will last. In response, an alphabet soup of programs came out of Washington D.C. to offset the pressure created by shutting down output. How effective these measures will be won’t be known for months or even quarters, and they could likely have at least some influence on the economy for years (e.g., careers of students recently graduating from college may be impacted for years).
Five lags are typically associated with various policies, but one might be the biggest variable this time around. Data, recognition, legislative, and implementation lags were compressed this time since the shutdown was self-imposed. All things considered, it didn’t take that long to get trillions of dollars of support into the economy. Now we are waiting for the last lag: effectiveness. Substantial uncertainty exists about how long it will take to see the outcomes of the support and any unintended consequences.
When the north pole is at its closest point relative to the sun of the year, ice melt is probably the greatest. But it takes time for the oceans to reach their warmest temperatures for the year (that’s why California’s ocean water feels nicer in September than now). Like the economy’s chain reaction after peak fiscal and monetary stimulation, many variables are at work after the peak of sun exposure and only time will tell how hot both things get.