New York City may still be closed for the most part, and the lights are still out on Broadway, but factories across the state are open for business.  In the latest release of the Empire Manufacturing report for the New York region, the headline index of general business conditions rose from 3.7 up to 17.0 which was a full ten points above consensus forecasts.  What’s very encouraging about these readings is that in the case of both current conditions and expectations, the levels for September are higher now than they were pre-COVID.  Despite concerns that the running off of Federal relief programs was going to cause a sharp slowdown in activity, that hasn’t shown up in the Empire Manufacturing report as of yet.

In the early days of the COVID pandemic, manufacturers’ sentiment for present conditions dropped much more than their expectations for the future. In April, the spread between Expectations and Current Conditions was as wide as it has ever been.  As businesses have come back online, though, things have moved back into a more normal range. In fact, the current spread of 30.60 is pretty much right in line with its historical average (30.1).  That’s a great indication of how quickly certain parts of the economy have been able to adjust and adapt to the new reality.

Breadth in this month’s report was also fantastic.  Every component of the Current Conditions part of the report improved relative to August, and just two of the components in the Expectations part (Delivery Times and Prices Received) declined.  The biggest improvement came in the Average Workweek, while Number of Employees saw the smallest increase.  That suggests that rather than hiring new workers, employers are getting more out of their current workforces.  Not necessarily great for the jobs outlook.

Plans for Capital Expenditures and Technology Spending also increased in September.  After dropping to their lowest levels since the Financial Crisis earlier this year, the rebound in both indices has been nearly as swift as the pullback.  While current levels are still below where they were pre-COVID, the pace of recovery has never been sharper. The economy may still be far from normal, but things have bounced back a lot faster than many were thinking a few months ago.  Click here to start a free trial to Bespoke to unlock full access to all of our research and interactive tools.

Yesterday the Energy Information Agency released their monthly snapshot of energy markets data for the United States.  Much of the data is somewhat lagged; the data discussed in this post is only updated through May.

Our first chart highlights the huge shift away from coal and towards natural gas as an energy source, driven by both regulation and the economics of fracking.  Also notable is the growth of wind and solar energy; solar especially is having an incredible year as production has risen an astounding 140% annualized in 2020.

The other recent shift in the domestic energy market is the COVID-driven plunge in petroleum share of total energy output.  In April, petroleum fell below one-third of total US energy consumption as driving activity plunged.  Obviously, this is very short-term and will rebound, but the growth of renewables and natural gas amidst the decline of coal will continue, unlike shorter-term trends like the highest share of nuclear power consumption on record.

We also wanted to highlight the energy trade balance.  Historically, the US has imported vastly more energy than it has produced, but the massive expansion of domestic oil and natural gas production has reversed that precedent entirely.

As shown below, the US went from importing 2.5 trillion more BTUs of energy than it produced back in 2006 to exporting more energy than it imports beginning in August of last year.  “Energy independence” isn’t a realistic or helpful goal, because large gross trade flows can increase efficiency, but on a net basis, the US has now been energy independent for about a year.  This post was originally published in our post-market macro report — The Closer — on 9/14/20.  Click here to start a free trial to Bespoke Institutional and receive our nightly Closer for the next two weeks, featuring more commentary and data on macro markets.

Today is the last day of trading for the September 2020 lumber future. Unlike the constant front-month, which now references November delivery futures, September lumber settled at $984.50 yesterday. The physical lumber market remains extremely tight, fueled by booming demand from construction, COVID’s impact on production eating into inventories, and now the forest fires in the West. Buyers who can wait a couple of months for delivery save 32% off the price of the current front-month contract; going out to next May that number is an impressive 48%; the futures market is pushing off construction into later quarters via price.  Click here to start a free trial to Bespoke Institutional and receive our nightly Closer for the next two weeks, featuring more commentary and data on macro markets.

With all the liquidity that has been put into the system, the number of Americans concerned about the dollar’s purchasing power has seen a great deal of inflation.  Just last week, legendary investor Stanley Druckenmiller became the latest person to publicly worry about the possibility of double-digit inflation in the coming years.  With those types of concerns becoming increasingly mainstream, it’s no wonder that the price of gold remains right near record highs.  Despite the recent 5% pullback in prices, gold remains just under $2,000 per ounce after bouncing off support just above $1,900 which is a level that also coincides with its 50-day moving average. Since its high in early August, each bounce off the $1,900 level has been met with a lower high, so until this consolidation phase either breaks above $2,000 or below $1,900, it’s probably best to just sit tight.

Bitcoin has also been trading in somewhat of a consolidation pattern after breaking above resistance at $10,000 in late July.  While bitcoin’s price rallied above $12,000 just as gold was peaking, its price pulled back in early September as risk assets corrected.  However, just as $10,000 provided stiff resistance on the way up for the past year, the first test of $10,000 to the downside has held up so far.  Investors increasingly view bitcoin as the digital version of gold, so by that logic, any bullish argument for gold should apply to bitcoin as well.  Like what you see? Make sure to sign up for a free trial to unlock all of Bespoke’s analysis and interactive tools.