Just when I thought I was out, they pull me back in. The context may be a little different, but this line spoken by Al Pacino in The Godfather came to mind as I considered this week. On the one hand we have a subtle but persistent rise in the number of COVID-19 cases across a growing number of states, which is becoming harder to explain away. On the other hand, we have a stock market driven by both fear and greed, sometimes simultaneously, which makes sitting on the sidelines seem foolish. Put these two ideas together and it gives rise to both uncertainty and volatility.
With the benefit of a few months, we now can see the consequences of the economic shutdown. You no doubt know the unemployment rate has hit double-digits and may know someone personally who has been directly impacted by recent events. However, I’m talking about something else completely. New reports indicate that on average, states’ tax revenues fell approximately 20% during the shutdown. At least ten states will see their tax collections sink by more than 30% due to the pandemic, with both New York and Maine topping the list at 40%. Meanwhile, Congress is deadlocked over whether it should send more cash to states. It seems unlikely we’re going to have another shutdown even if the number of cases rise sharply. States simply can’t afford it.
In company news, which I am aware I haven’t talked about much these past few months, I came across an interesting development at Walmart. It seems the company is doubling down on self-checkout lanes. The retailer is removing all cashiers and conveyor belt lanes at its flagship store in Fayetteville, Arkansas, and if successful, the program could be expanded to more of its stores. I wonder how long before this becomes standard practice across most retailers. While we’re talking about retailers, May Retail Sales were up almost 18% month-over-month, which points to the strength of the recovery which started in May as various states began to reopen.
Additionally, this week the White House began consideration of a fourth stimulus package for another $1 trillion to improve failing infrastructure (specifically roads, bridges, rural broadband, and 5G). Forgive me if I’m a little jaded, but it seems over the past four decades, I’ve heard these proposals many times before and yet our infrastructure never seems to significantly improve. The silver lining is that also under discussion is state aid, liability protection, an unemployment extension, and ‘return to work incentives.’ Despite both sides of the aisle expressing support for such spending, it becomes increasingly difficult as the national debt grows and time passes.
In closing, the recent civil unrest has reminded us that while our country has made great strides in overcoming racism and providing opportunities for the disadvantaged, there is still more to be done. This week PepsiCo announced it plans on rebranding its Aunt Jemima line of pancake mix, syrup and other breakfast foods which dates back to 1889 and is one of the most recognized brands in U.S. history. The woman depicted in the logo is Nancy Green who was born a slave on a plantation in Montgomery County, Kentucky in 1834. The company admitted this week that this depiction is based on a racial stereotype and has no place in society today. Among other brands that are under consideration for a remake are Uncle Ben’s rice (1943) which is owned by Mars Inc., Mrs. Butterworth's (1961) which is owned by Conagra, and Cream of Wheat (1893) which is owned by B&G Foods. Before I conclude, I’ll leave you with a quote that is worth considering. “Human progress is neither automatic nor inevitable. Every step toward the goals requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.” – Martin Luther King
Bruce J. Mason, MBA