Record-breaking April: Savings ⬆️ Spending ⬇️

Monday, June 1, 2020 by Robinhood Snacks | Disclosures

Checking out the emergency fund

Last Week’s Market Moves
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10-Yr US Treasury

Hey Snackers,

After last week's gains, the S&P 500 has recovered most of its losses from the COVID-19 stock market crash — By Friday, it was down just 10% from its February record high. But despite economic and market progress, it was a painful week for the US.

Protests broke out across the country demanding justice after the horrific murder of George Floyd. Over a dozen US cities issued curfews Saturday as some protests turned violentTarget, Walmart, and Nike closed hundreds of stores after incidents of looting.

1. Americans have shockingly higher incomes than pre-COVID — what April meant for our wallets

Like Benjamins in the freezer... Despite 41M jobs lost in the past 10 weeks and a stunning 15% unemployment rate, Americans' household saving and personal income posted record increases in April. It's confusing, but it also makes sense. Check out these April stats:

  • Consumer spending plunged 13.6%, the biggest monthly decline on record. Not surprising given nationwide lockdowns. Americans mainly spent on essentials given the economic uncertainty. Buut...
  • Personal income jumped 10.5%, thanks to $1.2K government stimulus checks and $600/week extra in unemployment benefits. According to a new study, 68% of unemployed workers who can receive benefits are eligible for payments larger than their original salaries.
  • Wages and salaries fell 8% but that was more than offset by unemployment/stimulus checks. People made more money this April than last April, on average.
  • The personal-saving rate soared to 33% in April, meaning Americans saved 33% of their disposable income — an all-time high. That's a dramatic increase from 12.7% in March and is quadruple February's rate of 8.2%.

Americans are historically terrible savers... The United States is a more consumerist and debt-loving country with inequality that has many living on the financial edge.

  • 78% of US workers were living paycheck to paycheck in January 2019 — around 40% of US households wouldn't be able to come up with $400 for an emergency expense.
  • Now that jobs and economic stability are far from a sure thing, Americans are turning to saving as a survival instinct in a time of crisis.

Too much saving could actually hurt the economy... A prolonged period of extra saving and conservative spending will slow the economic rebound — your not buying is someone else's not earning. Crucially, the enhanced unemployment benefits and small biz loans keeping many afloat start to run dry in July. So we need some combo of economic re-opening, COVID outbreak control, and more government emergency assistance. Fast.

  • Napping on the Pottery Barn couch... Williams-Sonoma is the CA-based home goods retailer behind Pottery Barn, West Elm and (wait for it...) Williams-Sonoma stores. Its stock surged 13% after unboxing some chic (yet comfortable) results: despite closed stores, WS sales actually grew thanks to its online prowess (it's now calling itself: "digital first"). Ecommerce sales jumped 30% on lockdown-induced home makeovers.
  • Less CBD protein powder promos in-feed (please)... Facebook-owned Instagram will share ad revenue with influencers for the first time (ever). Insta will run ads on IGTV, then give creators a 55% cut of revenue from their vids (Google does the same with YouTube). This move could help Insta lure more famous creators (like big YouTubers) onto IGTV. Popular creators = popular content = more users = more ad $$$ for Facebook. YouTube got Zuck'd.
  • A billion up in smoke... Earth's largest cannabis company, Canopy Growth, took a $1.3B hit last quarter. The Canadian pot producer saw a 14% decline in direct-to-consumer sales, which it blamed on "off-peak seasonal demand decline" and COVID-related store closures. Canopy burned its 2021 financial guidance and its stock dropped over 21% on the buzz-kill news.

  • When Liam Hemsworth can't extract you... Mobile-first streamer Quibi may be running out of time to turn its "meh" reputation around. Two months after launching, the $1.8B "quick bites" streamer hasn't lived up to the hype. Now advertisers are reportedly looking to defer payments over low viewership concerns. Those in-between moments in life Quibi was designed for aren't happening with COVID, so Quibi's adding AirPlay streaming in hopes that'll attract more at-home viewers.

What else we’re Snackin’
  • Communicate: How social distancing has turned our lives into software — Zoom is to in-person contact as Soylent is to milk.
  • Visualize: All of the world's money and markets in one visualization (quadrillions are a thing).
  • Quiz: Think you have an eye for great user design? Test it out in this weirdly engaging quiz.
  • Work: Little changes you can make when you've hit a wall working from home (upgrade your sweats game).
  • Draw: 54 ways coronavirus has changed our world (in little arrow illustrations).
Snacks Daily Podcast

Make breakfast with Gordon Ramsay, hit a high C note with Christina Aguilera in the afternoon, then explore the cosmos with Neil deGrasse Tyson in the evening. Apparently that costs $180/year.

MasterClass just hit an $800M valuation for its celebrity-taught, stream-able lessons — but this fundraise is all about virtual reality ("Serena Williams Teaches Tennis" was born for VR).

We're looking at MasterClass and the failures of VR in Snacks Daily, our 15-minute daily podcast.

This Week

Disclosure: Authors of this Snacks own shares of Alphabet

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