Welcome to the Weekly Scan. Here’s what we’re following for the week of January 19, 2021.
Biden’s economic roadmap. On the eve of his inauguration, President-elect Joe Biden announced plans for a new $1.9 trillion economic stimulus package, called the America Rescue Plan. His proposal includes $1,400 in direct payments to eligible Americans, in addition to the $600 payments approved in December as part of the $900 billion stimulus package, for a total of $2,000. The plan would also increase additional unemployment payments to $400 from $300 a week, and extend those payments through September, 2021.The package would also provide $15 billion for small businesses, $350 billion for states and territories, $25 billion in rental assistance, and $70 billion for expanded virus testing, a national vaccination program, and hiring an additional 100,000 public health care workers to distribute vaccines. The plan also includes increasing the federal minimum to $15 an hour, from $7.25.
- The takeaway: Although Biden and fellow Democrats will hold a slim lead in Congress, it may still be a challenge to get his stimulus package passed, and will depend on the votes of more moderate party members. Many experts, including Federal Reserve Chairman Jerome Powell, view additional stimulus money as vital to an economic recovery. Approximately 10.7 million Americans are currently unemployed.
Pass the chips. Semiconductor companies are reportedly experiencing shortfalls in their ability to manufacture microprocessors used in most products today, including cars, 5G phones, and most consumer electronics. A surge in the need for laptop computers and other work-from-home technology has reportedly contributed to the squeeze on the industry, causing costs to rise. The shortage could also lead to delays in production and potentially higher prices for consumers. In response, Ford Motor Company will idle a production facility in Kentucky, and General Motors Company asked suppliers to stockpile a year’s worth of chips.
- The takeaway: Semiconductor manufacturers are reportedly caught in a bind. Many of which have outdated equipment devoted to less lucrative microchips, for which there is still strong demand. Meanwhile, demand for newer chips that power things like digital gaming has increased beyond the production capacity of many manufacturers. The lead time for microchips has generally increased to six months from 10 weeks prior to the pandemic.
Bitcoin bubble (again). The value of cryptocurrency Bitcoin surged to an all-time high of more than $40,000 on January 7, 2021, raising suggestions over another bubble. (It subsequently fell by 15% the following week.) Bitcoin has recovered from three big dips in the last ten years, falling more than 80% each time. Like other cryptocurrencies, Bitcoin is volatile since it’s a relatively new investment.
- The takeaway: Analysts at the hedge fund Man Group say that Bitcoin’s volatility might just be a characteristic of a new asset class, and not a series of bubbles.They also suggest that Bitcoin’s highs and lows could even out over time, as investors accustom themselves to cryptocurrency.
Big companies unPAC. Some of the largest banks and corporations announced that they would temporarily stop donating money to political action committees (PACs), especially those that supported Republican Congress members who voted to overturn President-elect Biden’s electoral win on January 7, and in response to the riots at the Capitol building on January 6, 2021. Goldman Sachs will halt all donations through its Political Action Committee (PAC) and JPMorgan Chase will pause its donations for six months. Citigroup will do the same for three months. Marriott, Blue Cross Blue Shield, and others are putting a stop to donations to candidates that supported opposition to the certification of the 2020 election results.
- The takeaway: This pause is likely to be temporary, and comes at a time when political donations are typically already at a low as election season has wound down.The 147 Republicans who voted to overturn the 2020 election reportedly received $170 million in corporate contributions in the past few years.