Below is a chart and brief excerpt from today's Early Look written by Macro analyst Christian Drake.

There is no shortage of anecdata and pseudo-quant around the still acute state of fundamentals conditions for Small Business. Time does not heal all financial wounds – it’s quite the converse actually as it relates to the capacity for small business to weather a protracted period of depressed demand.  And the clock tick is getting unequivocally louder. 

  • PPP fund exhaustion:  According to the latest NFIB Survey, as of July 21st 71% of small businesses have exhausted the entirety of their PPP funding. 
  • Half of small businesses indicated the need for additional financial support over the next six months.
  • In a separate American Express survey, 62% of small businesses indicated they needed consumer spending return to pre-virus levels by the end of 2020 in order to stay in business …
  • … That is not a high probability scenario.  Given the magnitude of the shock, the timeline for full eco and labor market renormalization is unlikely to occur this year and the longer suppressed demand remains the reality, the more likely we are to see workers transition to (or back to) unemployed.  

The small business plight feeds directly back into the pro-cyclical zeitgeist and its fleeting cameo in the latest bout of factor rotation angst. 

CHART OF THE DAY: The Clock Tick Is Getting Louder - CoD Clock Tick