Weekly Thematic

It’s Simple Harmonic Motion, not Emotion – Watch the Recoil! 
October 30, 2020
Companies Mentioned:
LyondellBasell Huntsman, Covestro, Olin, BASF, Air Liquide, Air Products, Linde, Braskem, HB Fuller, Dow
Commodities Mentioned:
Subjects Covered:
3Q Demand Discussion, Durable Goods Bubble, COVID, Economic Growth, China Demand and Exports, Climate Change, ESG, Home Sales

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 

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