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Stimulus Talks Continue; Plus AXP, Housing Relief

Friday, October 23, 2020

Market indexes indicate a higher open this Friday, as further talks between House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin continue another day, now well past the self-imposed deadline to arrive at an agreement, which was earlier this week. The longer the talks go on, the more likely no agreement will be reached until after Election Day on November 3rd.

Depending on the results of the election, however, we might see this elusive agreement put in doubt even further. For now, markets prefer to look at the sunny side of the street.

Part of what likely will be decided in any stimulus package agreement wouldn’t have to do with stimulus at all, but maintaining Americans in their residences, as the labor market has been ravaged by the coronavirus pandemic. A new census survey released this morning displays a dire figure: 10% of renters in the U.S. have no confidence in their ability to pay their rent due.

Among 1.34 million households, $7.2 billion in back-rent is owed, which averages out to $5400 per household. And with no stimulus and no job, this will be an impossible hurdle for many households to overcome.

An agency order from the Center for Disease Control & Prevention (CDC), in an effort not to further spread the Covid-19 coronavirus spurred by evictions, has instated a moratorium on landlords’ ability to kick renters out of residences where rent has not been paid. That’s the good news.

The bad news is that this moratorium expires on January 1st; without a furtherance of federal protection to keep renters in their homes — or additional stimulus checks which would allow households to pay rent — this could take a bad situation and make it much, much worse at the start of 2021.

Mortgage bailouts currently tally 3 million according to the same survey, largely due to pandemic conditions hampering the economy, 5.6% of which are first-time liens and 80% of mortgage bailouts having been extended. A good percentage are in the Fannie/Freddie or FHA loan category, which are mortgages already granted assistance. The housing (and home-building) market has been robust of late, but the point of view changes a bit if we look at the ability of mortgage holders to pay their monthly bills.

In all, 8.5 million Americans have been diagnosed with Covid-19 to date, with the fatality toll now north of 223K. More than 70K new cases per day are being reported, putting us at the highest level since July. States with notable resurgences in cases include New Jersey, Wisconsin, Arizona, Pennsylvania and Illinois — at least one of which are considered “swing states” in the upcoming election. The U.S. is now on pace for close to a quarter-million Covid-related deaths by Election Day.

American Express AXP, a Zacks Rank #4 (Sell)-rated stock ahead of its Q3 earnings report released this morning, where it posted mixed results: $1.39 per share beat the Zacks consensus by 9 cents, while revenues of $8.75 billion missed expectations by 1% and were well below the $10.99 billion reported in the year-ago quarter. We know savings have gone up during the pandemic crisis; this reduced business with AmEx credit cards represents the other side of the coin. Shares are down 4% in early trading, adding onto the -15.8% drop for the stock year to date. For more on AXP’s earnings earnings, click here.

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