Chart Talk: March 14th, 2024


Since COVID, the nature of the global economy has shifted.  New business applications hit a previous  all-time high in 2021 at over 5.4 million, nearly doubling from 2015.  Many attributed the surge in the number of new business applications to former entrepreneurs reopening businesses that failed during the pandemic or surplus transfer payments received from the government.  However, as you can see from the chart below, the trend continued to accelerate with 5.0 million new business applications in 2022 and a record breaking 5.5 million in 2023.  Calendar year 2024 has also started out strong  as the U.S. Census Bureau reported that 436,358 new business applications were received during January alone.

This data would suggest that the engine behind the global economy has somewhat shifted – and it looks like this will be another “new normal.”  As this shift occurs, we must be careful not to take one set of data and draw a conclusion as to how the financial markets will react.  As noted above, the economy is currently riding a tailwind of large numbers of business formations along with an unemployment rate at or near a fifty-year low.  However, it remains to be seen as to what number of these small business will survive over the next few years and what will ultimately be their contribution to economic growth.  Are they perhaps part-time businesses, meant to supplement a decline in real income as a result of post-COVID inflation?  These are some of the questions we will continue to ask ourselves as we evaluate the economy.  It is important not to confuse correlation with causation.  As economies and financial markets shift, as investors, we will continue to have an open mind and evolve our methodologies as well.

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