C-MACC Perspectives 31 – The Pendulum
It’s Simple Harmonic Motion, not Emotion – Watch the Recoil!
- The durable goods boom of the last 5 months is very likely a bubble, and one that could get a little bigger before it bursts, probably dramatically. While we believe for multiple reasons that history is a poor guide to evaluate underlying fundamentals these days – pendulums tend to always swing back.
- It is extremely difficult to judge what is cyclical, situational, and normal during COVID, but those companies suggesting with 3Q earnings that unnaturally strong demand in non-consumable end markets can and will likely continue are in need of some better advice. You may buy a pumpkin (or two) every year, but you do not buy a couch that frequently – or other durables that are currently spiking.
- If the COVID related dislocations stretch well into the next year and global economies weaken further – the money will not be there to keep durable demand elevated. On the other hand, if vaccines are successful, the at-home durable good purchase boom will fall also. There is no happy ending – the swing is inevitable.
See PDF below for all charts