A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.
As CEO of one of America’s biggest banks, Bank of America’s Brian Moynihan has unique insight into the health of the country’s economy. And right now, what he’s seeing is positive.
What’s happening: In an interview on CBS’ “Face the Nation” on Sunday, Moynihan said that consumer spending has jumped above $1 trillion this year, a 20% increase over 2019 levels.
And Americans are still sitting on a lot of extra cash.
“Our consumers have lots of money in their checking accounts,” Moynihan said. “They have not spent about 65 [to] 70% of the last couple of rounds of stimulus.”
A caveat: With the US economy still not fully back to normal, not everyone is thriving. But three rounds of stimulus payments have helped.
The US government has sent $804 billion directly to low- and middle-income individuals and families via direct deposit, checks or debit cards. According to a study published recently by researchers at the University of Michigan, the payments substantially reduced “material hardship” based on an analysis of Census data.
“It would appear the circumstances of US households improved following the delivery of robust income transfers deployed by the federal government,” the report’s authors wrote.
With some of that stimulus money still parked at the bank, Americans have significant financial power to fuel the economy’s ongoing resurgence.
Car rentals and hotels for leisure travel are “strong,” Moynihan said, adding that people are also starting to spend more at restaurants.
Bank of America predicts that the US economy will grow by 7% this year and 5.5% in 2022.
But there are a few catches. If consumers spend the stimulus money they’ve been saving, that could increase demand for goods and services beyond what the economy can provide, spurring inflation.
Moynihan also pointed to scrambled supply chains and worker shortages — problems Before the Bell readers are very familiar with — as “key risks.”
The latest: Export growth in China was worse than expected in May, according to data released Monday, with analysts pointing to computer chip shortages and other supply chain issues as one factor.
The Financial Times reports that Singapore-based Flex, one of the world’s top electronics contract manufacturers, now expects semiconductor shortages to run into 2022 or even 2023.
Crude investors eye Iran nuclear talks as prices rise
US oil prices hit $70 a barrel on Sunday for the first time in nearly three years.
While prices have since backed off slightly from that milestone, it still underscores the dramatic rebound in energy prices after crude took an unprecedented dive below zero in April 2020, my CNN Business colleague Matt Egan reports.
The $70 mark is a staggering $110 a barrel above that record low. The last time the US benchmark oil contract traded above $70 was October 2018.
The comeback has been driven by the recovery in demand for gasoline and jet fuel as the global economy races back to life. The Organization of the Petroleum Exporting Countries and Russia also continue to restrain supply, though they plan to ease production cuts in the coming months.
Brent crude futures, the global benchmark, at one point rose above $72 per barrel on Monday.
The next test: Investors are watching the latest round of negotiations between Iran and global powers in Vienna this week. A nuclear deal could result in more supply hitting the market, causing prices to fall back.
“Should a deal be agreed upon, sanctions on Iran’s oil exports could be lifted,” Oanda market analyst Sophie Griffiths told clients on Monday. “However, any changes are likely to be gradual.”
Meme stock mania puts Russell 2000 in the spotlight
The Russell 2000 index of small US stocks has soared this year. That’s partially thanks to members GameStop (GME) and AMC (AMC).
The high-profile index — which has exposed a wide swath of investors to so-called meme stocks popular with online investors — has jumped 16% year-to-date, beating the S&P 500.
The market value of companies in the Russell 2000 has surged 84% in the past year to $3.5 trillion, index manager FTSE Russell said Friday. The smallest company in the index is now Velocity Financial, which is worth $257 million. In 2020, the smallest firm was Limestone Bancorp, which was valued at almost $95 million.
Catherine Yoshimoto, FTSE Russell director of product management, attributed the gains to “the overall bounce back of US equity markets following the COVID-19 recession in early 2020.”
But excitement surrounding meme stocks also plays a role, heightening attention on FTSE Russell’s annual index rebalancing process, which takes place this month. GameStop and AMC are expected to be booted from the Russell 2000 due to their massive growth and join the Russell 1000 index of larger firms.
Why it matters: Tons of everyday investors have products tracking the Russell indices in their portfolios or retirement accounts, which means that fate of GameStop and other big names doesn’t just affect the Reddit crowd. A shakeup that shuffles around these explosive but volatile stocks is worth watching.
Stitch Fix (SFIX) reports results after US markets close.
Also today: Apple’s Worldwide Developers Conference kicks off.
Coming tomorrow: The latest data on US job openings arrives as the labor market picks up steam.