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Trade Deficit Hits Record Low: -$71.1 Billion

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Wednesday, April 7, 2021

In this morning’s pre-market, we see a new all-time record U.S. Trade Deficit for the month of February, breaching -$70 billion for the first time, to -$71.1 billion. This is even lower than the expected -$70.5 billion and easily takes out the previous all-time low from December 2020, which was -$69.04 billion. The revision to January’s headline improved from -$68.28 billion first reported to -$67.82 billion this time around.

Exports fell 2.6% on primarily industrials, aircraft, semis, food and beverages, while Imports dipped a slower 0.7% on autos and pharma supplies. The Goods deficit now stands at +88 billion, with the Surplus down 0.5% month over month to $16.9 billion. Though this is not a desirable direction to find ourselves in, what it illustrates clearly is that the U.S. economy is recovering from the Covid pandemic quicker than most of its trading partners.

From post-World War II through the mid-1970s, our trade balance was kept strictly dead-even. This loosened notably during the 80s, but really fell off a cliff around the start of the new millennium. The last time we hovered down in this sub-$60 billion range was ahead of the Great Recession, where the bailout that began in 2008/09 righted the ship to a notable extent. This is not to suggest another economic crater is on the horizon because of this, but it will be worth keeping an eye on.

Speaking of keeping an eye on things, this afternoon we will see the minutes of the last meeting of the Federal Open Market Committee (FOMC), which occurred mid-March and cited important touchpoints such as a drastic lessening of Covid infections, a notable increase in vaccinations, and the emerging re-opening of segments of the domestic economy. The game plan has been not to raise interest rates until 2023 in order to encourage growth; analysts will be looking for language that indicates opinions in the FOMC may be changing.

The latest G20 summit — remotely, this time — comes out with a press briefing this morning. While we understand the U.S. has come a long way back from pandemic lows — and we expect Q1 earnings results to demonstrate this clearly — conditions are still dire in many of the countries represented in the G20, such as Brazil (with a nasty new outbreak of infections) and France (difficulties vaccinating citizens at a high rate). While the U.S. may be strong, we look for the day when the global economy has recovered.

Market futures are gingerly in negative territory for the second-straight day, following a robust start to the trading week. JPMorgan Chase’s (JPM - Free Report) CEO Jamie Dimon has released a long, detailed message to investors where he discusses the new complexion of the domestic environment — including working and shopping from home practices continuing into the Grand Reopening — and sees strength through 2023. He also talks about higher corporate and individual tax rates accompanying these growth rates.

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